Correlation Between Marfrig Global and BG Foods

Can any of the company-specific risk be diversified away by investing in both Marfrig Global and BG 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 Marfrig Global and BG Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Marfrig Global Foods and BG Foods, you can compare the effects of market volatilities on Marfrig Global and BG 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 Marfrig Global with a short position of BG Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marfrig Global and BG Foods.

Diversification Opportunities for Marfrig Global and BG Foods

0.31

Correlation Coefficient

Marfrig Global  BG Foods

Weak diversification

The 3 months correlation between Marfrig and BGS is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Marfrig Global Foods and BG Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BG Foods and Marfrig Global 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 Marfrig Global Foods are associated (or correlated) with BG Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BG Foods has no effect on the direction of Marfrig Global i.e., Marfrig Global and BG Foods go up and down completely randomly.

Pair Corralation between Marfrig Global and BG Foods

Assuming the 90 days horizon Marfrig Global Foods is expected to generate 1.61 times more return on investment than BG Foods. However, Marfrig Global is 1.61 times more volatile than BG Foods. It trades about 0.05 of its potential returns per unit of risk. BG Foods is currently generating about 0.03 per unit of risk. If you would invest  254.00  in Marfrig Global Foods on December 19, 2024 and sell it today you would earn a total of  21.00  from holding Marfrig Global Foods or generate 8.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Marfrig Global Foods  vs.  BG Foods

Marfrig Global Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Marfrig Global showed solid returns over the last few months and may actually be approaching a breakup point.

BG Foods

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BG Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, BG Foods 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 Marfrig Global and BG Foods

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

The idea behind Marfrig Global Foods and BG 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.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.