Correlation Between BRF SA and Calbee

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

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

Diversification Opportunities for BRF SA and Calbee

0.08

Correlation Coefficient

BRF SA  Calbee

Significant diversification

The 3 months correlation between BRF and Calbee is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Calbee Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calbee Inc and BRF SA 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 BRF SA ADR are associated (or correlated) with Calbee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calbee Inc has no effect on the direction of BRF SA i.e., BRF SA and Calbee go up and down completely randomly.

Pair Corralation between BRF SA and Calbee

Given the investment horizon of 90 days BRF SA ADR is expected to generate 1.19 times more return on investment than Calbee. However, BRF SA is 1.19 times more volatile than Calbee Inc. It trades about 0.08 of its potential returns per unit of risk. Calbee Inc is currently generating about 0.01 per unit of risk. If you would invest  137.00  in BRF SA ADR on September 21, 2024 and sell it today you would earn a total of  291.00  from holding BRF SA ADR or generate 212.41% return on investment over 90 days.

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

BRF SA ADR  vs.  Calbee Inc

BRF SA ADR

Risk-Adjusted Performance

0 of 100

Insignificant

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.

Calbee Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Calbee Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with BRF SA and Calbee

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

The idea behind BRF SA ADR and Calbee Inc 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.