Correlation Between BRF SA and Freshpet
Can any of the company-specific risk be diversified away by investing in both BRF SA and Freshpet 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 Freshpet into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRF SA ADR and Freshpet, you can compare the effects of market volatilities on BRF SA and Freshpet 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 Freshpet. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Freshpet.
Diversification Opportunities for BRF SA and Freshpet
Very poor diversification
The 3 months correlation between BRF and Freshpet is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Freshpet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freshpet 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 ADR are associated (or correlated) with Freshpet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freshpet has no effect on the direction of BRF SA i.e., BRF SA and Freshpet go up and down completely randomly.
Pair Corralation between BRF SA and Freshpet
Given the investment horizon of 90 days BRF SA ADR is expected to generate 1.0 times more return on investment than Freshpet. However, BRF SA is 1.0 times more volatile than Freshpet. It trades about 0.11 of its potential returns per unit of risk. Freshpet is currently generating about 0.11 per unit of risk. If you would invest 272.00 in BRF SA ADR on January 20, 2024 and sell it today you would earn a total of 55.00 from holding BRF SA ADR or generate 20.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 98.44% |
Values | Daily Returns |
BRF SA ADR vs. Freshpet
Performance |
Timeline |
BRF SA ADR |
Freshpet |
BRF SA and Freshpet Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BRF SA and Freshpet
The main advantage of trading using opposite BRF SA and Freshpet positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA position performs unexpectedly, Freshpet 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 Freshpet will offset losses from the drop in Freshpet's long position.BRF SA vs. Green Globe International | BRF SA vs. Greenlane Holdings | BRF SA vs. 22nd Century Group | BRF SA vs. 1606 Corp |
Freshpet vs. Green Globe International | Freshpet vs. Greenlane Holdings | Freshpet vs. 22nd Century Group | Freshpet vs. 1606 Corp |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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