Correlation Between Bunge and Village Farms

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

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

Diversification Opportunities for Bunge and Village Farms

0.44

Correlation Coefficient

Bunge  Village Farms

Very weak diversification

The 3 months correlation between Bunge and Village is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Village Farms International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Farms Intern and Bunge 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 Bunge Limited are associated (or correlated) with Village Farms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Farms Intern has no effect on the direction of Bunge i.e., Bunge and Village Farms go up and down completely randomly.

Pair Corralation between Bunge and Village Farms

Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 0.39 times more return on investment than Village Farms. However, Bunge Limited is 2.57 times less risky than Village Farms. It trades about -0.11 of its potential returns per unit of risk. Village Farms International is currently generating about -0.2 per unit of risk. If you would invest  10,106  in Bunge Limited on June 30, 2024 and sell it today you would lose (333.00) from holding Bunge Limited or give up 3.3% of portfolio value over 90 days.

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

Bunge Limited  vs.  Village Farms International

Bunge Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bunge Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Village Farms Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Farms International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Village Farms is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bunge and Village Farms

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

The idea behind Bunge Limited and Village Farms International 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.