Correlation Between 1606 Corp and BRF SA

Can any of the company-specific risk be diversified away by investing in both 1606 Corp 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 1606 Corp and BRF SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1606 Corp and BRF SA ADR, you can compare the effects of market volatilities on 1606 Corp 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 1606 Corp with a short position of BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1606 Corp and BRF SA.

Diversification Opportunities for 1606 Corp and BRF SA

-0.61

Correlation Coefficient

1606 Corp  BRF SA

Excellent diversification

The 3 months correlation between 1606 and BRF is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding 1606 Corp 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 1606 Corp 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 1606 Corp 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 1606 Corp i.e., 1606 Corp and BRF SA go up and down completely randomly.

Pair Corralation between 1606 Corp and BRF SA

Given the investment horizon of 90 days 1606 Corp is expected to under-perform the BRF SA. In addition to that, 1606 Corp is 4.96 times more volatile than BRF SA ADR. It trades about -0.13 of its total potential returns per unit of risk. BRF SA ADR is currently generating about 0.1 per unit of volatility. If you would invest  287.00  in BRF SA ADR on February 2, 2024 and sell it today you would earn a total of  46.00  from holding BRF SA ADR or generate 16.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

1606 Corp  vs.  BRF SA ADR

1606 Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1606 Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

BRF SA ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, BRF SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 1606 Corp and BRF SA

The main advantage of trading using opposite 1606 Corp and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1606 Corp 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 1606 Corp 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.