Correlation Between BRF SA and Torque Lifestyle

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

Diversification Opportunities for BRF SA and Torque Lifestyle

-0.19

Correlation Coefficient

BRF SA  Torque Lifestyle

Good diversification

The 3 months correlation between BRF and Torque is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Torque Lifestyle Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Torque Lifestyle Brands 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 Torque Lifestyle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Torque Lifestyle Brands has no effect on the direction of BRF SA i.e., BRF SA and Torque Lifestyle go up and down completely randomly.

Pair Corralation between BRF SA and Torque Lifestyle

Given the investment horizon of 90 days BRF SA is expected to generate 18.16 times less return on investment than Torque Lifestyle. But when comparing it to its historical volatility, BRF SA ADR is 16.82 times less risky than Torque Lifestyle. It trades about 0.08 of its potential returns per unit of risk. Torque Lifestyle Brands is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  0.50  in Torque Lifestyle Brands on September 13, 2024 and sell it today you would lose (0.33) from holding Torque Lifestyle Brands or give up 66.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

BRF SA ADR  vs.  Torque Lifestyle Brands

BRF SA ADR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 6 (%) 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.

Torque Lifestyle Brands

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Torque Lifestyle Brands are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain essential indicators, Torque Lifestyle sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BRF SA and Torque Lifestyle

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

The idea behind BRF SA ADR and Torque Lifestyle Brands 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.