Correlation Between Branded Legacy and BRF SA

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

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

Diversification Opportunities for Branded Legacy and BRF SA

-0.45

Correlation Coefficient

Branded Legacy  BRF SA

Very good diversification

The 3 months correlation between Branded and BRF is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Branded Legacy 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 Branded Legacy 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 Branded Legacy 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 Branded Legacy i.e., Branded Legacy and BRF SA go up and down completely randomly.

Pair Corralation between Branded Legacy and BRF SA

Given the investment horizon of 90 days Branded Legacy is expected to generate 4.86 times more return on investment than BRF SA. However, Branded Legacy is 4.86 times more volatile than BRF SA ADR. It trades about 0.1 of its potential returns per unit of risk. BRF SA ADR is currently generating about -0.1 per unit of risk. If you would invest  0.05  in Branded Legacy on December 27, 2024 and sell it today you would earn a total of  0.02  from holding Branded Legacy or generate 40.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Branded Legacy  vs.  BRF SA ADR

Branded Legacy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Branded Legacy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Branded Legacy reported solid returns over the last few months and may actually be approaching a breakup point.

BRF SA ADR

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Branded Legacy and BRF SA

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

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.