Can any of the company-specific risk be diversified away by investing in both Marfrig Global and NH 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 Marfrig Global and NH Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marfrig Global Foods and NH Foods Ltd, you can compare the effects of market volatilities on Marfrig Global and NH 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 Marfrig Global with a short position of NH Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marfrig Global and NH Foods.
Diversification Opportunities for Marfrig Global and NH Foods
The 3 months correlation between Marfrig and NIPMY is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Marfrig Global Foods and NH Foods Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NH Foods and Marfrig Global 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 Marfrig Global Foods are associated (or correlated) with NH Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NH Foods has no effect on the direction of Marfrig Global i.e., Marfrig Global and NH Foods go up and down completely randomly.
Pair Corralation between Marfrig Global and NH Foods
Assuming the 90 days horizon Marfrig Global Foods is expected to generate 3.41 times more return on investment than NH Foods. However, Marfrig Global is 3.41 times more volatile than NH Foods Ltd. It trades about 0.04 of its potential returns per unit of risk. NH Foods Ltd is currently generating about 0.13 per unit of risk. If you would invest 195.00 in Marfrig Global Foods on March 5, 2024 and sell it today you would earn a total of 9.00 from holding Marfrig Global Foods or generate 4.62% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Marfrig Global may actually be approaching a critical reversion point that can send shares even higher in July 2024.
Compared to the overall equity markets, risk-adjusted returns on investments in NH Foods Ltd are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, NH Foods may actually be approaching a critical reversion point that can send shares even higher in July 2024.