Correlation Between 22nd Century and Bunge

Can any of the company-specific risk be diversified away by investing in both 22nd Century 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 22nd Century and Bunge into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 22nd Century Group and Bunge Limited, you can compare the effects of market volatilities on 22nd Century 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 22nd Century with a short position of Bunge. Check out your portfolio center. Please also check ongoing floating volatility patterns of 22nd Century and Bunge.

Diversification Opportunities for 22nd Century and Bunge

-0.72

Correlation Coefficient

22nd Century  Bunge

Pay attention - limited upside

The 3 months correlation between 22nd and Bunge is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding 22nd Century Group and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and 22nd Century 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 22nd Century Group 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 22nd Century i.e., 22nd Century and Bunge go up and down completely randomly.

Pair Corralation between 22nd Century and Bunge

Given the investment horizon of 90 days 22nd Century Group is expected to generate 22.87 times more return on investment than Bunge. However, 22nd Century is 22.87 times more volatile than Bunge Limited. It trades about 0.07 of its potential returns per unit of risk. Bunge Limited is currently generating about 0.04 per unit of risk. If you would invest  192.00  in 22nd Century Group on February 1, 2024 and sell it today you would lose (34.00) from holding 22nd Century Group or give up 17.71% of portfolio value over 90 days.

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

22nd Century Group  vs.  Bunge Limited

22nd Century Group

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days 22nd Century Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly uncertain forward indicators, 22nd Century demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Bunge Limited

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bunge Limited are ranked lower than 13 (%) 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 22nd Century and Bunge

The main advantage of trading using opposite 22nd Century and Bunge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 22nd Century 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 22nd Century Group 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.