Correlation Between Adecoagro and Darling Ingredients

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

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

Diversification Opportunities for Adecoagro and Darling Ingredients

0.64

Correlation Coefficient

Adecoagro  Darling Ingredients

Poor diversification

The 3 months correlation between Adecoagro and Darling is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Adecoagro SA and Darling Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darling Ingredients 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 Darling Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darling Ingredients has no effect on the direction of Adecoagro i.e., Adecoagro and Darling Ingredients go up and down completely randomly.

Pair Corralation between Adecoagro and Darling Ingredients

Given the investment horizon of 90 days Adecoagro SA is expected to generate 0.9 times more return on investment than Darling Ingredients. However, Adecoagro SA is 1.11 times less risky than Darling Ingredients. It trades about -0.02 of its potential returns per unit of risk. Darling Ingredients is currently generating about -0.08 per unit of risk. If you would invest  1,101  in Adecoagro SA on February 2, 2024 and sell it today you would lose (19.00) from holding Adecoagro SA or give up 1.73% of portfolio value over 90 days.

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

Adecoagro SA  vs.  Darling Ingredients

Adecoagro SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Adecoagro SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Adecoagro is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Darling Ingredients

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Darling Ingredients has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Darling Ingredients is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Adecoagro and Darling Ingredients

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

The idea behind Adecoagro SA and Darling Ingredients 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.