Correlation Between BrasilAgro Companhia and Archer Daniels

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

By analyzing existing cross correlation between BrasilAgro Companhia and Archer Daniels Midland, you can compare the effects of market volatilities on BrasilAgro Companhia and Archer Daniels 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 BrasilAgro Companhia with a short position of Archer Daniels. Check out your portfolio center. Please also check ongoing floating volatility patterns of BrasilAgro Companhia and Archer Daniels.

Diversification Opportunities for BrasilAgro Companhia and Archer Daniels

-0.51

Correlation Coefficient

BrasilAgro Companhia  Archer Daniels

Excellent diversification

The 3 months correlation between BrasilAgro and Archer is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding BrasilAgro Companhia and Archer Daniels Midland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Archer Daniels Midland and BrasilAgro Companhia 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 BrasilAgro Companhia are associated (or correlated) with Archer Daniels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Archer Daniels Midland has no effect on the direction of BrasilAgro Companhia i.e., BrasilAgro Companhia and Archer Daniels go up and down completely randomly.

Pair Corralation between BrasilAgro Companhia and Archer Daniels

Assuming the 90 days trading horizon BrasilAgro Companhia is expected to under-perform the Archer Daniels. But the stock apears to be less risky and, when comparing its historical volatility, BrasilAgro Companhia is 1.43 times less risky than Archer Daniels. The stock trades about -0.09 of its potential returns per unit of risk. The Archer Daniels Midland is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  27,159  in Archer Daniels Midland on April 24, 2025 and sell it today you would earn a total of  3,374  from holding Archer Daniels Midland or generate 12.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

BrasilAgro Companhia  vs.  Archer Daniels Midland

BrasilAgro Companhia

Risk-Adjusted Performance

Very Weak

Over the last 90 days BrasilAgro Companhia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Archer Daniels Midland

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Archer Daniels Midland are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Archer Daniels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BrasilAgro Companhia and Archer Daniels

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

The idea behind BrasilAgro Companhia and Archer Daniels Midland 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.