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
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bunge and Village is 0.67. 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 under-perform the Village Farms. But the stock apears to be less risky and, when comparing its historical volatility, Bunge Limited is 2.94 times less risky than Village Farms. The stock trades about -0.04 of its potential returns per unit of risk. The Village Farms International is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 80.00 in Village Farms International on August 24, 2024 and sell it today you would lose (3.26) from holding Village Farms International or give up 4.08% 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. Village Farms International
Performance |
| Timeline |
| Bunge Limited |
| Village Farms Intern |
Bunge and Village Farms Volatility Contrast
Predicted Return Density |
| Returns |
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.| Village Farms vs. Alico Inc | Village Farms vs. SW Seed Company | Village Farms vs. Adecoagro SA | Village Farms vs. Tyson Foods |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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