Correlation Between Lancaster Colony and Bunge
Can any of the company-specific risk be diversified away by investing in both Lancaster Colony 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 Lancaster Colony and Bunge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lancaster Colony and Bunge Limited, you can compare the effects of market volatilities on Lancaster Colony 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 Lancaster Colony with a short position of Bunge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lancaster Colony and Bunge.
Diversification Opportunities for Lancaster Colony and Bunge
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lancaster and Bunge is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Lancaster Colony and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Lancaster Colony 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 Lancaster Colony 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 Lancaster Colony i.e., Lancaster Colony and Bunge go up and down completely randomly.
Pair Corralation between Lancaster Colony and Bunge
Given the investment horizon of 90 days Lancaster Colony is expected to under-perform the Bunge. But the stock apears to be less risky and, when comparing its historical volatility, Lancaster Colony is 1.28 times less risky than Bunge. The stock trades about -0.34 of its potential returns per unit of risk. The Bunge Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 10,229 in Bunge Limited on January 31, 2024 and sell it today you would earn a total of 119.00 from holding Bunge Limited or generate 1.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Lancaster Colony vs. Bunge Limited
Performance |
Timeline |
Lancaster Colony |
Bunge Limited |
Lancaster Colony and Bunge Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Lancaster Colony and Bunge
The main advantage of trading using opposite Lancaster Colony and Bunge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lancaster Colony 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.Lancaster Colony vs. Golden Agri Resources | Lancaster Colony vs. Fresh Del Monte | Lancaster Colony vs. Alico Inc | Lancaster Colony vs. SW Seed Company |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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