Correlation Between Marfrig Global and BLACK

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

Diversification Opportunities for Marfrig Global and BLACK

-0.21

Correlation Coefficient

Marfrig Global  BLACK

Very good diversification

The 3 months correlation between Marfrig and BLACK is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Marfrig Global Foods and BLACK HILLS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BLACK HILLS P 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 BLACK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BLACK HILLS P has no effect on the direction of Marfrig Global i.e., Marfrig Global and BLACK go up and down completely randomly.

Pair Corralation between Marfrig Global and BLACK

Assuming the 90 days horizon Marfrig Global Foods is expected to generate 5.41 times more return on investment than BLACK. However, Marfrig Global is 5.41 times more volatile than BLACK HILLS P. It trades about 0.01 of its potential returns per unit of risk. BLACK HILLS P is currently generating about -0.12 per unit of risk. If you would invest  266.00  in Marfrig Global Foods on October 8, 2024 and sell it today you would lose (5.00) from holding Marfrig Global Foods or give up 1.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.5%
Values	Daily Returns

Marfrig Global Foods  vs.  BLACK HILLS P

Marfrig Global Foods

Risk-Adjusted Performance

4 of 100

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 conflicting basic indicators, Marfrig Global showed solid returns over the last few months and may actually be approaching a breakup point.

BLACK HILLS P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BLACK HILLS P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, BLACK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Marfrig Global and BLACK

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

The idea behind Marfrig Global Foods and BLACK HILLS P 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.