Correlation Between WH Group and BRF SA

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Can any of the company-specific risk be diversified away by investing in both WH Group 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 WH Group and BRF SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WH Group Limited and BRF SA ADR, you can compare the effects of market volatilities on WH Group 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 WH Group with a short position of BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of WH Group and BRF SA.

Diversification Opportunities for WH Group and BRF SA

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between WHGRF and BRF is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding WH Group Limited 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 WH Group 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 WH Group Limited 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 WH Group i.e., WH Group and BRF SA go up and down completely randomly.

Pair Corralation between WH Group and BRF SA

Assuming the 90 days horizon WH Group is expected to generate 3.38 times less return on investment than BRF SA. In addition to that, WH Group is 1.24 times more volatile than BRF SA ADR. It trades about 0.02 of its total potential returns per unit of risk. BRF SA ADR is currently generating about 0.08 per unit of volatility. If you would invest  365.00  in BRF SA ADR on September 13, 2024 and sell it today you would earn a total of  100.00  from holding BRF SA ADR or generate 27.4% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

WH Group Limited  vs.  BRF SA ADR

 Performance 
       Timeline  
WH Group Limited 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in WH Group Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, WH Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.
BRF SA ADR 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, BRF SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WH Group and BRF SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WH Group and BRF SA

The main advantage of trading using opposite WH Group and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WH Group 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 WH Group Limited 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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