Correlation Between BRF SA and Glucose Health

Can any of the company-specific risk be diversified away by investing in both BRF SA and Glucose Health 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 Glucose Health 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 Glucose Health, you can compare the effects of market volatilities on BRF SA and Glucose Health 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 Glucose Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Glucose Health.

Diversification Opportunities for BRF SA and Glucose Health

-0.17

Correlation Coefficient

BRF SA  Glucose Health

Good diversification

The 3 months correlation between BRF and Glucose is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Glucose Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glucose Health 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 Glucose Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glucose Health has no effect on the direction of BRF SA i.e., BRF SA and Glucose Health go up and down completely randomly.

Pair Corralation between BRF SA and Glucose Health

Given the investment horizon of 90 days BRF SA is expected to generate 1.62 times less return on investment than Glucose Health. But when comparing it to its historical volatility, BRF SA ADR is 4.53 times less risky than Glucose Health. It trades about 0.11 of its potential returns per unit of risk. Glucose Health is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Glucose Health on September 12, 2024 and sell it today you would lose (15.00) from holding Glucose Health or give up 51.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.07%
Values	Daily Returns

BRF SA ADR  vs.  Glucose Health

BRF SA ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, BRF SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Glucose Health

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Glucose Health are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Glucose Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BRF SA and Glucose Health

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

The idea behind BRF SA ADR and Glucose Health 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.