Correlation Between Bunge and 22nd Century

Can any of the company-specific risk be diversified away by investing in both Bunge and 22nd Century at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bunge and 22nd Century into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bunge Limited and 22nd Century Group, you can compare the effects of market volatilities on Bunge and 22nd Century and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bunge with a short position of 22nd Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and 22nd Century.

Diversification Opportunities for Bunge and 22nd Century

0.63

Correlation Coefficient

Bunge  22nd Century

Poor diversification

The 3 months correlation between Bunge and 22nd is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and 22nd Century Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 22nd Century Group and Bunge is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bunge Limited are associated (or correlated) with 22nd Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 22nd Century Group has no effect on the direction of Bunge i.e., Bunge and 22nd Century go up and down completely randomly.

Pair Corralation between Bunge and 22nd Century

Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 0.15 times more return on investment than 22nd Century. However, Bunge Limited is 6.5 times less risky than 22nd Century. It trades about -0.03 of its potential returns per unit of risk. 22nd Century Group is currently generating about -0.12 per unit of risk. If you would invest  7,731  in Bunge Limited on December 26, 2024 and sell it today you would lose (312.00) from holding Bunge Limited or give up 4.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bunge Limited  vs.  22nd Century Group

Bunge Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bunge Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Bunge is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

22nd Century Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days 22nd Century Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Bunge and 22nd Century

The main advantage of trading using opposite Bunge and 22nd Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge position performs unexpectedly, 22nd Century can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in 22nd Century will offset losses from the drop in 22nd Century's long position.

The idea behind Bunge Limited and 22nd Century Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.