Correlation Between Bon Natural and Adecoagro

Can any of the company-specific risk be diversified away by investing in both Bon Natural and Adecoagro 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 Bon Natural and Adecoagro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bon Natural Life and Adecoagro SA, you can compare the effects of market volatilities on Bon Natural and Adecoagro 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 Bon Natural with a short position of Adecoagro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bon Natural and Adecoagro.

Diversification Opportunities for Bon Natural and Adecoagro

-0.05

Correlation Coefficient

Bon Natural  Adecoagro

Good diversification

The 3 months correlation between Bon and Adecoagro is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bon Natural Life and Adecoagro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adecoagro SA and Bon Natural 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 Bon Natural Life are associated (or correlated) with Adecoagro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adecoagro SA has no effect on the direction of Bon Natural i.e., Bon Natural and Adecoagro go up and down completely randomly.

Pair Corralation between Bon Natural and Adecoagro

Considering the 90-day investment horizon Bon Natural Life is expected to under-perform the Adecoagro. In addition to that, Bon Natural is 1.77 times more volatile than Adecoagro SA. It trades about -0.19 of its total potential returns per unit of risk. Adecoagro SA is currently generating about 0.17 per unit of volatility. If you would invest  973.00  in Adecoagro SA on December 2, 2024 and sell it today you would earn a total of  95.00  from holding Adecoagro SA or generate 9.76% return on investment over 90 days.

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

Bon Natural Life  vs.  Adecoagro SA

Bon Natural Life

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bon Natural Life has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Adecoagro SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adecoagro SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Adecoagro is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bon Natural and Adecoagro

The main advantage of trading using opposite Bon Natural and Adecoagro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bon Natural position performs unexpectedly, Adecoagro 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 Adecoagro will offset losses from the drop in Adecoagro's long position.

The idea behind Bon Natural Life and Adecoagro SA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.