Correlation Between Grupo Bimbo and BRF SA

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

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

Diversification Opportunities for Grupo Bimbo and BRF SA

-0.26

Correlation Coefficient

Grupo Bimbo  BRF SA

Very good diversification

The 3 months correlation between Grupo and BRF is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Bimbo SAB and BRF SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA ADR and Grupo Bimbo 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 Grupo Bimbo SAB are associated (or correlated) with BRF SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRF SA ADR has no effect on the direction of Grupo Bimbo i.e., Grupo Bimbo and BRF SA go up and down completely randomly.

Pair Corralation between Grupo Bimbo and BRF SA

Assuming the 90 days horizon Grupo Bimbo SAB is expected to under-perform the BRF SA. But the pink sheet apears to be less risky and, when comparing its historical volatility, Grupo Bimbo SAB is 1.09 times less risky than BRF SA. The pink sheet trades about -0.07 of its potential returns per unit of risk. The BRF SA ADR is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  419.00  in BRF SA ADR on September 14, 2024 and sell it today you would earn a total of  46.00  from holding BRF SA ADR or generate 10.98% return on investment over 90 days.

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

Grupo Bimbo SAB  vs.  BRF SA ADR

Grupo Bimbo SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Bimbo SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BRF SA ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Grupo Bimbo and BRF SA

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

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