Correlation Between Bunge and Flowers Foods
Can any of the company-specific risk be diversified away by investing in both Bunge and Flowers Foods 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 Flowers Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bunge Limited and Flowers Foods, you can compare the effects of market volatilities on Bunge and Flowers Foods 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 Flowers Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and Flowers Foods.
Diversification Opportunities for Bunge and Flowers Foods
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bunge and Flowers is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and Flowers Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowers Foods 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 Flowers Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowers Foods has no effect on the direction of Bunge i.e., Bunge and Flowers Foods go up and down completely randomly.
Pair Corralation between Bunge and Flowers Foods
Allowing for the 90-day total investment horizon Bunge Limited is expected to under-perform the Flowers Foods. In addition to that, Bunge is 1.46 times more volatile than Flowers Foods. It trades about -0.1 of its total potential returns per unit of risk. Flowers Foods is currently generating about -0.01 per unit of volatility. If you would invest 2,292 in Flowers Foods on August 31, 2024 and sell it today you would lose (19.00) from holding Flowers Foods or give up 0.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bunge Limited vs. Flowers Foods
Performance |
| Timeline |
| Bunge Limited |
| Flowers Foods |
Bunge and Flowers Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bunge and Flowers Foods
The main advantage of trading using opposite Bunge and Flowers Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge position performs unexpectedly, Flowers Foods 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 Flowers Foods will offset losses from the drop in Flowers Foods' long position.The idea behind Bunge Limited and Flowers Foods 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.| Flowers Foods vs. ConAgra Foods | Flowers Foods vs. McCormick Company Incorporated | Flowers Foods vs. Campbell Soup | Flowers Foods vs. Kellanova |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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