Correlation Between Torque Lifestyle and BRF SA

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

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

Diversification Opportunities for Torque Lifestyle and BRF SA

0.12

Correlation Coefficient

Torque Lifestyle  BRF SA

Average diversification

The 3 months correlation between Torque and BRF is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Torque Lifestyle Brands 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 Torque Lifestyle 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 Torque Lifestyle Brands 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 Torque Lifestyle i.e., Torque Lifestyle and BRF SA go up and down completely randomly.

Pair Corralation between Torque Lifestyle and BRF SA

Given the investment horizon of 90 days Torque Lifestyle Brands is expected to generate 5.36 times more return on investment than BRF SA. However, Torque Lifestyle is 5.36 times more volatile than BRF SA ADR. It trades about 0.05 of its potential returns per unit of risk. BRF SA ADR is currently generating about 0.07 per unit of risk. If you would invest  0.78  in Torque Lifestyle Brands on October 22, 2024 and sell it today you would lose (0.65) from holding Torque Lifestyle Brands or give up 83.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Torque Lifestyle Brands  vs.  BRF SA ADR

Torque Lifestyle Brands

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Torque Lifestyle Brands are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Torque Lifestyle sustained solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Torque Lifestyle and BRF SA

The main advantage of trading using opposite Torque Lifestyle and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Torque Lifestyle 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 Torque Lifestyle Brands 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.