Correlation Between Farmmi and Bunge

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

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

Diversification Opportunities for Farmmi and Bunge

-0.6

Correlation Coefficient

Farmmi  Bunge

Excellent diversification

The 3 months correlation between Farmmi and Bunge is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Farmmi Inc and Bunge Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunge Limited and Farmmi 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 Farmmi Inc 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 Farmmi i.e., Farmmi and Bunge go up and down completely randomly.

Pair Corralation between Farmmi and Bunge

Given the investment horizon of 90 days Farmmi Inc is expected to generate 5.25 times more return on investment than Bunge. However, Farmmi is 5.25 times more volatile than Bunge Limited. It trades about 0.11 of its potential returns per unit of risk. Bunge Limited is currently generating about -0.09 per unit of risk. If you would invest  20.00  in Farmmi Inc on September 1, 2024 and sell it today you would earn a total of  9.00  from holding Farmmi Inc or generate 45.0% return on investment over 90 days.

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

Farmmi Inc  vs.  Bunge Limited

Farmmi Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farmmi Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile primary indicators, Farmmi demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Bunge Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bunge Limited 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 Farmmi and Bunge

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

The idea behind Farmmi Inc and Bunge Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.