Correlation Between Treehouse Foods and BRF SA

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

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

Diversification Opportunities for Treehouse Foods and BRF SA

-0.49

Correlation Coefficient

Treehouse Foods  BRF SA

Very good diversification

The 3 months correlation between Treehouse and BRF is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Treehouse Foods and BRF SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA ADR and Treehouse Foods 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 Treehouse Foods are associated (or correlated) with BRF SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRF SA ADR has no effect on the direction of Treehouse Foods i.e., Treehouse Foods and BRF SA go up and down completely randomly.

Pair Corralation between Treehouse Foods and BRF SA

Considering the 90-day investment horizon Treehouse Foods is expected to generate 0.43 times more return on investment than BRF SA. However, Treehouse Foods is 2.33 times less risky than BRF SA. It trades about 0.25 of its potential returns per unit of risk. BRF SA ADR is currently generating about -0.3 per unit of risk. If you would invest  3,322  in Treehouse Foods on October 6, 2024 and sell it today you would earn a total of  200.00  from holding Treehouse Foods or generate 6.02% return on investment over 90 days.

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

Treehouse Foods  vs.  BRF SA ADR

Treehouse Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Treehouse Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

BRF SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRF SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, BRF SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Treehouse Foods and BRF SA

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

The idea behind Treehouse Foods and BRF SA ADR 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.