Correlation Between BRF SA and Retail Estates

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

By analyzing existing cross correlation between BRF SA and Retail Estates NV, you can compare the effects of market volatilities on BRF SA and Retail Estates 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 Retail Estates. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Retail Estates.

Diversification Opportunities for BRF SA and Retail Estates

-0.63

Correlation Coefficient

BRF SA  Retail Estates

Excellent diversification

The 3 months correlation between BRF and Retail is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA and Retail Estates NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Retail Estates NV 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 Retail Estates. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Retail Estates NV has no effect on the direction of BRF SA i.e., BRF SA and Retail Estates go up and down completely randomly.

Pair Corralation between BRF SA and Retail Estates

Assuming the 90 days horizon BRF SA is expected to under-perform the Retail Estates. In addition to that, BRF SA is 2.96 times more volatile than Retail Estates NV. It trades about -0.08 of its total potential returns per unit of risk. Retail Estates NV is currently generating about 0.02 per unit of volatility. If you would invest  5,880  in Retail Estates NV on October 5, 2024 and sell it today you would earn a total of  20.00  from holding Retail Estates NV or generate 0.34% return on investment over 90 days.

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

BRF SA  vs.  Retail Estates NV

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.

Retail Estates NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Retail Estates NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BRF SA and Retail Estates

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

The idea behind BRF SA and Retail Estates NV 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.