Correlation Between Bunge and John B
Can any of the company-specific risk be diversified away by investing in both Bunge and John B 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 John B into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bunge Limited and John B Sanfilippo, you can compare the effects of market volatilities on Bunge and John B 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 John B. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bunge and John B.
Diversification Opportunities for Bunge and John B
Poor diversification
The 3 months correlation between Bunge and John is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bunge Limited and John B Sanfilippo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John B Sanfilippo 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 John B. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John B Sanfilippo has no effect on the direction of Bunge i.e., Bunge and John B go up and down completely randomly.
Pair Corralation between Bunge and John B
Allowing for the 90-day total investment horizon Bunge Limited is expected to generate 0.64 times more return on investment than John B. However, Bunge Limited is 1.56 times less risky than John B. It trades about -0.14 of its potential returns per unit of risk. John B Sanfilippo is currently generating about -0.31 per unit of risk. If you would invest 7,792 in Bunge Limited on November 28, 2024 and sell it today you would lose (467.00) from holding Bunge Limited or give up 5.99% 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. John B Sanfilippo
Performance |
| Timeline |
| Bunge Limited |
| John B Sanfilippo |
Bunge and John B Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bunge and John B
The main advantage of trading using opposite Bunge and John B positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bunge position performs unexpectedly, John B 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 John B will offset losses from the drop in John B's long position.The idea behind Bunge Limited and John B Sanfilippo 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.| John B vs. Lancaster Colony | John B vs. Treehouse Foods | John B vs. Seneca Foods Corp | John B vs. J J Snack |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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