Correlation Between BRF SA and PPHE HOTEL

Can any of the company-specific risk be diversified away by investing in both BRF SA and PPHE HOTEL 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 BRF SA and PPHE HOTEL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BRF SA and PPHE HOTEL GROUP, you can compare the effects of market volatilities on BRF SA and PPHE HOTEL 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 BRF SA with a short position of PPHE HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and PPHE HOTEL.

Diversification Opportunities for BRF SA and PPHE HOTEL

0.68

Correlation Coefficient

BRF SA  PPHE HOTEL

Poor diversification

The 3 months correlation between BRF and PPHE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA and PPHE HOTEL GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPHE HOTEL GROUP and BRF SA 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 BRF SA are associated (or correlated) with PPHE HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPHE HOTEL GROUP has no effect on the direction of BRF SA i.e., BRF SA and PPHE HOTEL go up and down completely randomly.

Pair Corralation between BRF SA and PPHE HOTEL

Assuming the 90 days horizon BRF SA is expected to under-perform the PPHE HOTEL. In addition to that, BRF SA is 1.58 times more volatile than PPHE HOTEL GROUP. It trades about -0.08 of its total potential returns per unit of risk. PPHE HOTEL GROUP is currently generating about 0.44 per unit of volatility. If you would invest  1,460  in PPHE HOTEL GROUP on October 5, 2024 and sell it today you would earn a total of  230.00  from holding PPHE HOTEL GROUP or generate 15.75% return on investment over 90 days.

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

BRF SA  vs.  PPHE HOTEL GROUP

BRF SA

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days BRF SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, BRF SA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PPHE HOTEL GROUP

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days PPHE HOTEL GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather uncertain basic indicators, PPHE HOTEL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BRF SA and PPHE HOTEL

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

The idea behind BRF SA and PPHE HOTEL GROUP 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.