Correlation Between RIOLN and Marfrig Global

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

By analyzing existing cross correlation between RIOLN 5 09 MAR 33 and Marfrig Global Foods, you can compare the effects of market volatilities on RIOLN 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 RIOLN with a short position of Marfrig Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of RIOLN and Marfrig Global.

Diversification Opportunities for RIOLN and Marfrig Global

-0.47

Correlation Coefficient

RIOLN  Marfrig Global

Very good diversification

The 3 months correlation between RIOLN and Marfrig is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding RIOLN 5 09 MAR 33 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 RIOLN 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 RIOLN 5 09 MAR 33 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 RIOLN i.e., RIOLN and Marfrig Global go up and down completely randomly.

Pair Corralation between RIOLN and Marfrig Global

Assuming the 90 days trading horizon RIOLN 5 09 MAR 33 is expected to under-perform the Marfrig Global. But the bond apears to be less risky and, when comparing its historical volatility, RIOLN 5 09 MAR 33 is 5.7 times less risky than Marfrig Global. The bond trades about -0.14 of its potential returns per unit of risk. The Marfrig Global Foods is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  243.00  in Marfrig Global Foods on September 12, 2024 and sell it today you would earn a total of  84.00  from holding Marfrig Global Foods or generate 34.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

RIOLN 5 09 MAR 33  vs.  Marfrig Global Foods

RIOLN 5 09

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIOLN 5 09 MAR 33 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, RIOLN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Marfrig Global Foods

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 14 (%) 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 RIOLN and Marfrig Global

The main advantage of trading using opposite RIOLN and Marfrig Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RIOLN 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 RIOLN 5 09 MAR 33 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.