Correlation Between Altria and Bunge
Can any of the company-specific risk be diversified away by investing in both Altria 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 Altria and Bunge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Altria Group and Bunge Limited, you can compare the effects of market volatilities on Altria 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 Altria with a short position of Bunge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Altria and Bunge.
Diversification Opportunities for Altria and Bunge
Very good diversification
The 3 months correlation between Altria and Bunge is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Altria Group and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Altria 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 Altria Group 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 Altria i.e., Altria and Bunge go up and down completely randomly.
Pair Corralation between Altria and Bunge
Allowing for the 90-day total investment horizon Altria Group is expected to generate 1.19 times more return on investment than Bunge. However, Altria is 1.19 times more volatile than Bunge Limited. It trades about 0.33 of its potential returns per unit of risk. Bunge Limited is currently generating about -0.02 per unit of risk. If you would invest 5,025 in Altria Group on August 27, 2024 and sell it today you would earn a total of 650.00 from holding Altria Group or generate 12.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Altria Group vs. Bunge Limited
Performance |
| Timeline |
| Altria Group |
| Bunge Limited |
Altria and Bunge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Altria and Bunge
The main advantage of trading using opposite Altria and Bunge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altria 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.| Altria vs. British American Tobacco | Altria vs. Universal | Altria vs. Imperial Brands PLC | Altria vs. Philip Morris International |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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