Correlation Between Grocery Outlet and Bunge

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

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

Diversification Opportunities for Grocery Outlet and Bunge

-0.02

Correlation Coefficient

Grocery Outlet  Bunge

Good diversification

The 3 months correlation between Grocery and Bunge is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Grocery Outlet 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 Grocery Outlet Holding 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 Grocery Outlet i.e., Grocery Outlet and Bunge go up and down completely randomly.

Pair Corralation between Grocery Outlet and Bunge

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Bunge. In addition to that, Grocery Outlet is 2.34 times more volatile than Bunge Limited. It trades about -0.5 of its total potential returns per unit of risk. Bunge Limited is currently generating about -0.47 per unit of volatility. If you would invest  8,891  in Bunge Limited on September 28, 2024 and sell it today you would lose (1,053) from holding Bunge Limited or give up 11.84% of portfolio value over 90 days.

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

Grocery Outlet Holding  vs.  Bunge Limited

Grocery Outlet Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm 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 conflicting performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Grocery Outlet and Bunge

The main advantage of trading using opposite Grocery Outlet and Bunge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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 Grocery Outlet Holding 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.