Correlation Between BRF SA and NightFood Holdings
Can any of the company-specific risk be diversified away by investing in both BRF SA and NightFood Holdings 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 NightFood Holdings 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 NightFood Holdings, you can compare the effects of market volatilities on BRF SA and NightFood Holdings 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 NightFood Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and NightFood Holdings.
Diversification Opportunities for BRF SA and NightFood Holdings
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BRF and NightFood is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and NightFood Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NightFood Holdings 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 NightFood Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NightFood Holdings has no effect on the direction of BRF SA i.e., BRF SA and NightFood Holdings go up and down completely randomly.
Pair Corralation between BRF SA and NightFood Holdings
Given the investment horizon of 90 days BRF SA ADR is expected to under-perform the NightFood Holdings. But the stock apears to be less risky and, when comparing its historical volatility, BRF SA ADR is 4.34 times less risky than NightFood Holdings. The stock trades about -0.29 of its potential returns per unit of risk. The NightFood Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 0.69 in NightFood Holdings on December 3, 2024 and sell it today you would earn a total of 0.16 from holding NightFood Holdings or generate 23.19% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
BRF SA ADR vs. NightFood Holdings
Performance |
Timeline |
BRF SA ADR |
NightFood Holdings |
BRF SA and NightFood Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BRF SA and NightFood Holdings
The main advantage of trading using opposite BRF SA and NightFood Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA position performs unexpectedly, NightFood Holdings 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 NightFood Holdings will offset losses from the drop in NightFood Holdings' long position.BRF SA vs. Marfrig Global Foods | BRF SA vs. Pilgrims Pride Corp | BRF SA vs. John B Sanfilippo | BRF SA vs. Seneca Foods Corp |
NightFood Holdings vs. Premier Foods Plc | NightFood Holdings vs. Torque Lifestyle Brands | NightFood Holdings vs. Naturally Splendid Enterprises | NightFood Holdings vs. Aryzta AG PK |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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