Correlation Between Westrock Coffee and Bunge

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

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

Diversification Opportunities for Westrock Coffee and Bunge

0.66

Correlation Coefficient

Westrock Coffee  Bunge

Poor diversification

The 3 months correlation between Westrock and Bunge is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Westrock Coffee and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Westrock Coffee 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 Westrock Coffee 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 Westrock Coffee i.e., Westrock Coffee and Bunge go up and down completely randomly.

Pair Corralation between Westrock Coffee and Bunge

Given the investment horizon of 90 days Westrock Coffee is expected to under-perform the Bunge. In addition to that, Westrock Coffee is 2.01 times more volatile than Bunge Limited. It trades about -0.13 of its total potential returns per unit of risk. Bunge Limited is currently generating about -0.18 per unit of volatility. If you would invest  8,887  in Bunge Limited on November 28, 2024 and sell it today you would lose (1,460) from holding Bunge Limited or give up 16.43% of portfolio value over 90 days.

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

Westrock Coffee  vs.  Bunge Limited

Westrock Coffee

Risk-Adjusted Performance

Very Weak

Over the last 90 days Westrock Coffee has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private 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 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 March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Westrock Coffee and Bunge

The main advantage of trading using opposite Westrock Coffee and Bunge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Westrock Coffee 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 Westrock Coffee 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.