Correlation Between Marfrig Global and Collective Mining

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

Diversification Opportunities for Marfrig Global and Collective Mining

0.31

Correlation Coefficient

Marfrig Global  Collective Mining

Weak diversification

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

Pair Corralation between Marfrig Global and Collective Mining

Assuming the 90 days horizon Marfrig Global is expected to generate 1.14 times less return on investment than Collective Mining. But when comparing it to its historical volatility, Marfrig Global Foods is 1.11 times less risky than Collective Mining. It trades about 0.09 of its potential returns per unit of risk. Collective Mining is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  277.00  in Collective Mining on September 12, 2024 and sell it today you would earn a total of  80.00  from holding Collective Mining or generate 28.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	28.41%
Values	Daily Returns

Marfrig Global Foods  vs.  Collective Mining

Marfrig Global Foods

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 14 (%) 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.

Collective Mining

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Collective Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Collective Mining may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Marfrig Global and Collective Mining

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

The idea behind Marfrig Global Foods and Collective Mining 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.