Correlation Between Farmer Bros and Bunge
Can any of the company-specific risk be diversified away by investing in both Farmer Bros 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 Farmer Bros and Bunge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Farmer Bros Co and Bunge Limited, you can compare the effects of market volatilities on Farmer Bros 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 Farmer Bros with a short position of Bunge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmer Bros and Bunge.
Diversification Opportunities for Farmer Bros and Bunge
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Farmer and Bunge is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Farmer Bros Co and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Farmer Bros 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 Farmer Bros Co 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 Farmer Bros i.e., Farmer Bros and Bunge go up and down completely randomly.
Pair Corralation between Farmer Bros and Bunge
Given the investment horizon of 90 days Farmer Bros Co is expected to under-perform the Bunge. In addition to that, Farmer Bros is 1.42 times more volatile than Bunge Limited. It trades about -0.34 of its total potential returns per unit of risk. Bunge Limited is currently generating about 0.01 per unit of volatility. If you would invest 10,252 in Bunge Limited on January 29, 2024 and sell it today you would earn a total of 21.00 from holding Bunge Limited or generate 0.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 95.45% |
Values | Daily Returns |
Farmer Bros Co vs. Bunge Limited
Performance |
Timeline |
Farmer Bros |
Bunge Limited |
Farmer Bros and Bunge Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Farmer Bros and Bunge
The main advantage of trading using opposite Farmer Bros and Bunge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmer Bros 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.Farmer Bros vs. Golden Agri Resources | Farmer Bros vs. Fresh Del Monte | Farmer Bros vs. Alico Inc | Farmer Bros vs. SW Seed Company |
Bunge vs. Lancaster Colony | Bunge vs. Treehouse Foods | Bunge vs. John B Sanfilippo | Bunge vs. Seneca Foods Corp |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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