Correlation Between Planting Hope and Marfrig Global

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

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

Diversification Opportunities for Planting Hope and Marfrig Global

0.06

Correlation Coefficient

Planting Hope  Marfrig Global

Significant diversification

The 3 months correlation between Planting and Marfrig is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding The Planting Hope and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods and Planting Hope 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 The Planting Hope are associated (or correlated) with Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of Planting Hope i.e., Planting Hope and Marfrig Global go up and down completely randomly.

Pair Corralation between Planting Hope and Marfrig Global

Assuming the 90 days horizon The Planting Hope is expected to generate 39.52 times more return on investment than Marfrig Global. However, Planting Hope is 39.52 times more volatile than Marfrig Global Foods. It trades about 0.15 of its potential returns per unit of risk. Marfrig Global Foods is currently generating about -0.02 per unit of risk. If you would invest  0.16  in The Planting Hope on October 7, 2024 and sell it today you would lose (0.14) from holding The Planting Hope or give up 87.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.35%
Values	Daily Returns

The Planting Hope  vs.  Marfrig Global Foods

Planting Hope

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Planting Hope are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward-looking signals, Planting Hope reported solid returns over the last few months and may actually be approaching a breakup point.

Marfrig Global Foods

Risk-Adjusted Performance

4 of 100

Modest

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.

Pair Trading with Planting Hope and Marfrig Global

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

The idea behind The Planting Hope and Marfrig Global 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.