Correlation Between Adecoagro and Bunge

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

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

Diversification Opportunities for Adecoagro and Bunge

0.85

Correlation Coefficient

Adecoagro  Bunge

Very poor diversification

The 3 months correlation between Adecoagro and Bunge is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Adecoagro SA and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Adecoagro 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 Adecoagro SA 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 Adecoagro i.e., Adecoagro and Bunge go up and down completely randomly.

Pair Corralation between Adecoagro and Bunge

Given the investment horizon of 90 days Adecoagro SA is expected to generate 1.59 times more return on investment than Bunge. However, Adecoagro is 1.59 times more volatile than Bunge Limited. It trades about 0.05 of its potential returns per unit of risk. Bunge Limited is currently generating about 0.04 per unit of risk. If you would invest  1,090  in Adecoagro SA on January 31, 2024 and sell it today you would earn a total of  24.00  from holding Adecoagro SA or generate 2.2% return on investment over 90 days.

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

Adecoagro SA  vs.  Bunge Limited

Adecoagro SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Adecoagro SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Adecoagro may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Bunge Limited

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bunge Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Bunge reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adecoagro and Bunge

The main advantage of trading using opposite Adecoagro and Bunge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adecoagro 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 Adecoagro SA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.