Correlation Between Dole PLC and Brasilagro Adr

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

By analyzing existing cross correlation between Dole PLC and Brasilagro Adr, you can compare the effects of market volatilities on Dole PLC and Brasilagro Adr 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 Dole PLC with a short position of Brasilagro Adr. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dole PLC and Brasilagro Adr.

Diversification Opportunities for Dole PLC and Brasilagro Adr

0.77

Correlation Coefficient

Dole PLC  Brasilagro Adr

Poor diversification

The 3 months correlation between Dole and Brasilagro is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Dole PLC and Brasilagro Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brasilagro Adr and Dole PLC 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 Dole PLC are associated (or correlated) with Brasilagro Adr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brasilagro Adr has no effect on the direction of Dole PLC i.e., Dole PLC and Brasilagro Adr go up and down completely randomly.

Pair Corralation between Dole PLC and Brasilagro Adr

Given the investment horizon of 90 days Dole PLC is expected to generate 1.02 times more return on investment than Brasilagro Adr. However, Dole PLC is 1.02 times more volatile than Brasilagro Adr. It trades about -0.07 of its potential returns per unit of risk. Brasilagro Adr is currently generating about -0.1 per unit of risk. If you would invest  1,499  in Dole PLC on November 28, 2024 and sell it today you would lose (94.00) from holding Dole PLC or give up 6.27% of portfolio value over 90 days.

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

Dole PLC  vs.  Brasilagro Adr

Dole PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dole PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Brasilagro Adr

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brasilagro Adr has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Dole PLC and Brasilagro Adr

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

The idea behind Dole PLC and Brasilagro Adr 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.