Correlation Between BRF SA and Nomad Foods

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

Diversification Opportunities for BRF SA and Nomad Foods

0.49

Correlation Coefficient

BRF SA  Nomad Foods

Very weak diversification

The 3 months correlation between BRF and Nomad is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Nomad Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nomad Foods 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 Nomad Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nomad Foods has no effect on the direction of BRF SA i.e., BRF SA and Nomad Foods go up and down completely randomly.

Pair Corralation between BRF SA and Nomad Foods

Given the investment horizon of 90 days BRF SA ADR is expected to generate 1.99 times more return on investment than Nomad Foods. However, BRF SA is 1.99 times more volatile than Nomad Foods. It trades about 0.07 of its potential returns per unit of risk. Nomad Foods is currently generating about 0.01 per unit of risk. If you would invest  145.00  in BRF SA ADR on October 21, 2024 and sell it today you would earn a total of  230.00  from holding BRF SA ADR or generate 158.62% 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.  Nomad Foods

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nomad Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nomad Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Nomad Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BRF SA and Nomad Foods

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

The idea behind BRF SA ADR and Nomad Foods 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.