Correlation Between Consumer Staples and Bunge

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

By analyzing existing cross correlation between Consumer Staples Portfolio and Bunge Limited, you can compare the effects of market volatilities on Consumer Staples and Bunge 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 Consumer Staples with a short position of Bunge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumer Staples and Bunge.

Diversification Opportunities for Consumer Staples and Bunge

0.67

Correlation Coefficient

Consumer Staples  Bunge

Poor diversification

The 3 months correlation between Consumer and Bunge is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Consumer Staples Portfolio and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Consumer Staples 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 Consumer Staples Portfolio are associated (or correlated) with Bunge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bunge Limited has no effect on the direction of Consumer Staples i.e., Consumer Staples and Bunge go up and down completely randomly.

Pair Corralation between Consumer Staples and Bunge

Assuming the 90 days horizon Consumer Staples Portfolio is expected to generate 0.44 times more return on investment than Bunge. However, Consumer Staples Portfolio is 2.26 times less risky than Bunge. It trades about 0.01 of its potential returns per unit of risk. Bunge Limited is currently generating about -0.01 per unit of risk. If you would invest  8,606  in Consumer Staples Portfolio on October 11, 2024 and sell it today you would earn a total of  88.00  from holding Consumer Staples Portfolio or generate 1.02% return on investment over 90 days.

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

Consumer Staples Portfolio  vs.  Bunge Limited

Consumer Staples Por

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consumer Staples Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Bunge Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bunge Limited 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Consumer Staples and Bunge

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

The idea behind Consumer Staples Portfolio and Bunge Limited 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .