Correlation Between A2 Milk and BRF SA

Can any of the company-specific risk be diversified away by investing in both A2 Milk and BRF SA 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 A2 Milk and BRF SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The A2 Milk and BRF SA ADR, you can compare the effects of market volatilities on A2 Milk and BRF SA 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 A2 Milk with a short position of BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of A2 Milk and BRF SA.

Diversification Opportunities for A2 Milk and BRF SA

-0.24

Correlation Coefficient

A2 Milk  BRF SA

Very good diversification

The 3 months correlation between ACOPY and BRF is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding The A2 Milk and BRF SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA ADR and A2 Milk 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 The A2 Milk are associated (or correlated) with BRF SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRF SA ADR has no effect on the direction of A2 Milk i.e., A2 Milk and BRF SA go up and down completely randomly.

Pair Corralation between A2 Milk and BRF SA

Assuming the 90 days horizon The A2 Milk is expected to under-perform the BRF SA. In addition to that, A2 Milk is 1.73 times more volatile than BRF SA ADR. It trades about -0.01 of its total potential returns per unit of risk. BRF SA ADR is currently generating about 0.0 per unit of volatility. If you would invest  423.00  in BRF SA ADR on October 3, 2024 and sell it today you would lose (12.00) from holding BRF SA ADR or give up 2.84% of portfolio value over 90 days.

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

The A2 Milk  vs.  BRF SA ADR

A2 Milk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The A2 Milk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BRF SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRF SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, BRF SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with A2 Milk and BRF SA

The main advantage of trading using opposite A2 Milk and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A2 Milk position performs unexpectedly, BRF SA 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 BRF SA will offset losses from the drop in BRF SA's long position.

The idea behind The A2 Milk and BRF SA ADR 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.