Correlation Between Bunge and AgroFresh Solutions

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

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

Diversification Opportunities for Bunge and AgroFresh Solutions

0.76

Correlation Coefficient

Bunge  AgroFresh Solutions

Poor diversification

The 3 months correlation between Bunge and AgroFresh is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and AgroFresh Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AgroFresh Solutions 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 AgroFresh Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AgroFresh Solutions has no effect on the direction of Bunge i.e., Bunge and AgroFresh Solutions go up and down completely randomly.

Pair Corralation between Bunge and AgroFresh Solutions

If you would invest  300.00  in AgroFresh Solutions on February 5, 2024 and sell it today you would earn a total of  0.00  from holding AgroFresh Solutions or generate 0.0% 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.  AgroFresh Solutions

Bunge Limited

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bunge Limited are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Bunge reported solid returns over the last few months and may actually be approaching a breakup point.

AgroFresh Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AgroFresh Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, AgroFresh Solutions is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bunge and AgroFresh Solutions

The main advantage of trading using opposite Bunge and AgroFresh Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge position performs unexpectedly, AgroFresh Solutions 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 AgroFresh Solutions will offset losses from the drop in AgroFresh Solutions' long position.

The idea behind Bunge Limited and AgroFresh Solutions 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.