Correlation Between Adecoagro and Village Farms

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

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

Diversification Opportunities for Adecoagro and Village Farms

0.35

Correlation Coefficient

Adecoagro  Village Farms

Weak diversification

The 3 months correlation between Adecoagro and Village is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Adecoagro SA 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 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 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 Adecoagro i.e., Adecoagro and Village Farms go up and down completely randomly.

Pair Corralation between Adecoagro and Village Farms

Given the investment horizon of 90 days Adecoagro SA is expected to under-perform the Village Farms. But the stock apears to be less risky and, when comparing its historical volatility, Adecoagro SA is 1.11 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 0.19 of returns per unit of risk over similar time horizon. If you would invest  78.00  in Village Farms International on September 12, 2024 and sell it today you would earn a total of  7.64  from holding Village Farms International or generate 9.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Adecoagro SA  vs.  Village Farms International

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.

Village Farms Intern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Village Farms International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Adecoagro and Village Farms

The main advantage of trading using opposite Adecoagro and Village Farms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adecoagro 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 Adecoagro SA 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.