Correlation Between BRF SA and Borealis Foods

Can any of the company-specific risk be diversified away by investing in both BRF SA and Borealis Foods 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 Borealis Foods 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 Borealis Foods, you can compare the effects of market volatilities on BRF SA and Borealis Foods 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 Borealis Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Borealis Foods.

Diversification Opportunities for BRF SA and Borealis Foods

-0.71

Correlation Coefficient

BRF SA  Borealis Foods

Pay attention - limited upside

The 3 months correlation between BRF and Borealis is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Borealis Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Borealis Foods 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 Borealis Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Borealis Foods has no effect on the direction of BRF SA i.e., BRF SA and Borealis Foods go up and down completely randomly.

Pair Corralation between BRF SA and Borealis Foods

Given the investment horizon of 90 days BRF SA ADR is expected to generate 0.18 times more return on investment than Borealis Foods. However, BRF SA ADR is 5.55 times less risky than Borealis Foods. It trades about 0.02 of its potential returns per unit of risk. Borealis Foods is currently generating about -0.05 per unit of risk. If you would invest  342.00  in BRF SA ADR on March 14, 2024 and sell it today you would earn a total of  6.00  from holding BRF SA ADR or generate 1.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

BRF SA ADR  vs.  Borealis Foods

BRF SA ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, BRF SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Borealis Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with BRF SA and Borealis Foods

The main advantage of trading using opposite BRF SA and Borealis Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA position performs unexpectedly, Borealis Foods 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 Borealis Foods will offset losses from the drop in Borealis Foods' long position.

The idea behind BRF SA ADR and Borealis 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.