Correlation Between SW Seed and Adecoagro

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

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

Diversification Opportunities for SW Seed and Adecoagro

-0.34

Correlation Coefficient

SW Seed  Adecoagro

Very good diversification

The 3 months correlation between SANW and Adecoagro is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding SW Seed Company and Adecoagro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adecoagro SA and SW Seed 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 SW Seed Company 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 SW Seed i.e., SW Seed and Adecoagro go up and down completely randomly.

Pair Corralation between SW Seed and Adecoagro

Given the investment horizon of 90 days SW Seed Company is expected to under-perform the Adecoagro. In addition to that, SW Seed is 3.01 times more volatile than Adecoagro SA. It trades about -0.03 of its total potential returns per unit of risk. Adecoagro SA is currently generating about 0.18 per unit of volatility. If you would invest  934.00  in Adecoagro SA on December 29, 2024 and sell it today you would earn a total of  206.00  from holding Adecoagro SA or generate 22.06% return on investment over 90 days.

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

SW Seed Company  vs.  Adecoagro SA

SW Seed Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days SW Seed Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Adecoagro SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Adecoagro SA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Adecoagro displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SW Seed and Adecoagro

The main advantage of trading using opposite SW Seed and Adecoagro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SW Seed 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 SW Seed Company 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.