Correlation Between Adecoagro and NaturalShrimp

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

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

Diversification Opportunities for Adecoagro and NaturalShrimp

0.29

Correlation Coefficient

Adecoagro  NaturalShrimp

Modest diversification

The 3 months correlation between Adecoagro and NaturalShrimp is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Adecoagro SA and NaturalShrimp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NaturalShrimp and Adecoagro 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 Adecoagro SA are associated (or correlated) with NaturalShrimp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NaturalShrimp has no effect on the direction of Adecoagro i.e., Adecoagro and NaturalShrimp go up and down completely randomly.

Pair Corralation between Adecoagro and NaturalShrimp

Given the investment horizon of 90 days Adecoagro SA is expected to under-perform the NaturalShrimp. But the stock apears to be less risky and, when comparing its historical volatility, Adecoagro SA is 7.4 times less risky than NaturalShrimp. The stock trades about -0.03 of its potential returns per unit of risk. The NaturalShrimp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.30  in NaturalShrimp on September 17, 2024 and sell it today you would earn a total of  0.10  from holding NaturalShrimp or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Adecoagro SA  vs.  NaturalShrimp

Adecoagro SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adecoagro SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Adecoagro is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

NaturalShrimp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NaturalShrimp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent primary indicators, NaturalShrimp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adecoagro and NaturalShrimp

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

The idea behind Adecoagro SA and NaturalShrimp 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.