Two Equities Correlation Analysis
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BG
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This model provides you with a quick lookup of cross correlation between two equities. Please specify two instruments to run the correlation.
Diversification Opportunities for Bunge and NYSE Composite
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bunge and NYSE is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and NYSE Composite in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NYSE Composite and Bunge 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 Bunge Limited are associated (or correlated) with NYSE Composite. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NYSE Composite has no effect on the direction of Bunge i.e., Bunge and NYSE Composite go up and down completely randomly.
Pair Corralation between Bunge and NYSE Composite
Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 2.26 times more return on investment than NYSE Composite. However, Bunge is 2.26 times more volatile than NYSE Composite. It trades about 0.22 of its potential returns per unit of risk. NYSE Composite is currently generating about 0.12 per unit of risk. If you would invest 8,765 in Bunge Limited on January 26, 2024 and sell it today you would earn a total of 1,814 from holding Bunge Limited or generate 20.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Bunge Limited vs. NYSE Composite
Performance |
| Timeline |
Bunge and NYSE Composite Volatility Contrast
Predicted Return Density |
| Returns |
Bunge Limited
Pair trading matchups for Bunge
NYSE Composite
Pair trading matchups for NYSE Composite
Pair Trading with Bunge and NYSE Composite
The main advantage of trading using opposite Bunge and NYSE Composite positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge position performs unexpectedly, NYSE Composite 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 NYSE Composite will offset losses from the drop in NYSE Composite's long position.The idea behind Bunge Limited and NYSE Composite 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.| NYSE Composite vs. Nike Inc | NYSE Composite vs. Zoom Video Communications | NYSE Composite vs. Vera Bradley | NYSE Composite vs. Torm PLC Class |
Check out your portfolio center.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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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