Correlation Between Fresh Del and Bunge

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

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

Diversification Opportunities for Fresh Del and Bunge

0.56

Correlation Coefficient

Fresh Del  Bunge

Very weak diversification

The 3 months correlation between Fresh and Bunge is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fresh Del Monte and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Fresh Del 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 Fresh Del Monte 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 Fresh Del i.e., Fresh Del and Bunge go up and down completely randomly.

Pair Corralation between Fresh Del and Bunge

Considering the 90-day investment horizon Fresh Del Monte is expected to under-perform the Bunge. But the stock apears to be less risky and, when comparing its historical volatility, Fresh Del Monte is 1.31 times less risky than Bunge. The stock trades about -0.12 of its potential returns per unit of risk. The Bunge Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  7,732  in Bunge Limited on December 27, 2024 and sell it today you would lose (387.00) from holding Bunge Limited or give up 5.01% of portfolio value over 90 days.

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

Fresh Del Monte  vs.  Bunge Limited

Fresh Del Monte

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fresh Del Monte has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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.

Pair Trading with Fresh Del and Bunge

The main advantage of trading using opposite Fresh Del and Bunge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fresh Del 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 Fresh Del Monte 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.