Correlation Between Bunge and Industrias Bachoco
Can any of the company-specific risk be diversified away by investing in both Bunge and Industrias Bachoco 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 Bunge and Industrias Bachoco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bunge Limited and Industrias Bachoco SAB, you can compare the effects of market volatilities on Bunge and Industrias Bachoco 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 Bunge with a short position of Industrias Bachoco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and Industrias Bachoco.
Diversification Opportunities for Bunge and Industrias Bachoco
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bunge and Industrias is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Industrias Bachoco SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias Bachoco SAB 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 Industrias Bachoco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias Bachoco SAB has no effect on the direction of Bunge i.e., Bunge and Industrias Bachoco go up and down completely randomly.
Pair Corralation between Bunge and Industrias Bachoco
If you would invest 9,986 in Bunge Limited on January 26, 2024 and sell it today you would earn a total of 593.00 from holding Bunge Limited or generate 5.94% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 4.55% |
Values | Daily Returns |
Bunge Limited vs. Industrias Bachoco SAB
Performance |
Timeline |
Bunge Limited |
Industrias Bachoco SAB |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Bunge and Industrias Bachoco Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bunge and Industrias Bachoco
The main advantage of trading using opposite Bunge and Industrias Bachoco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge position performs unexpectedly, Industrias Bachoco 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 Industrias Bachoco will offset losses from the drop in Industrias Bachoco's long position.The idea behind Bunge Limited and Industrias Bachoco SAB 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.Industrias Bachoco vs. Fresh Del Monte | Industrias Bachoco vs. Alico Inc | Industrias Bachoco vs. SW Seed Company | Industrias Bachoco vs. Adecoagro SA |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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