Correlation Between Wilmar International and Bunge

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

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

Diversification Opportunities for Wilmar International and Bunge

0.66

Correlation Coefficient

Wilmar International  Bunge

Poor diversification

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

Pair Corralation between Wilmar International and Bunge

Assuming the 90 days horizon Wilmar International is expected to generate 1.41 times more return on investment than Bunge. However, Wilmar International is 1.41 times more volatile than Bunge Limited. It trades about -0.03 of its potential returns per unit of risk. Bunge Limited is currently generating about -0.12 per unit of risk. If you would invest  2,412  in Wilmar International on September 12, 2024 and sell it today you would lose (125.00) from holding Wilmar International or give up 5.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Wilmar International  vs.  Bunge Limited

Wilmar International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wilmar International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Wilmar International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Wilmar International and Bunge

The main advantage of trading using opposite Wilmar International and Bunge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wilmar International 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 Wilmar International 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.