Correlation Between Marfrig Global and CVW CleanTech

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

Diversification Opportunities for Marfrig Global and CVW CleanTech

0.42

Correlation Coefficient

Marfrig Global  CVW CleanTech

Very weak diversification

The 3 months correlation between Marfrig and CVW is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Marfrig Global Foods and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech 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 CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of Marfrig Global i.e., Marfrig Global and CVW CleanTech go up and down completely randomly.

Pair Corralation between Marfrig Global and CVW CleanTech

Assuming the 90 days horizon Marfrig Global Foods is expected to generate 0.45 times more return on investment than CVW CleanTech. However, Marfrig Global Foods is 2.21 times less risky than CVW CleanTech. It trades about 0.06 of its potential returns per unit of risk. CVW CleanTech is currently generating about 0.03 per unit of risk. If you would invest  150.00  in Marfrig Global Foods on October 22, 2024 and sell it today you would earn a total of  102.00  from holding Marfrig Global Foods or generate 68.0% return on investment over 90 days.

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

Marfrig Global Foods  vs.  CVW CleanTech

Marfrig Global Foods

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Marfrig Global is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

CVW CleanTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVW CleanTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CVW CleanTech is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Marfrig Global and CVW CleanTech

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

The idea behind Marfrig Global Foods and CVW CleanTech 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.