Correlation Between Adecoagro and BRF SA
Can any of the company-specific risk be diversified away by investing in both Adecoagro 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 Adecoagro and BRF SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adecoagro SA and BRF SA ADR, you can compare the effects of market volatilities on Adecoagro 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 Adecoagro with a short position of BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adecoagro and BRF SA.
Diversification Opportunities for Adecoagro and BRF SA
Poor diversification
The 3 months correlation between Adecoagro and BRF is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Adecoagro SA 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 Adecoagro 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 Adecoagro SA 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 Adecoagro i.e., Adecoagro and BRF SA go up and down completely randomly.
Pair Corralation between Adecoagro and BRF SA
Given the investment horizon of 90 days Adecoagro is expected to generate 3.29 times less return on investment than BRF SA. But when comparing it to its historical volatility, Adecoagro SA is 1.56 times less risky than BRF SA. It trades about 0.02 of its potential returns per unit of risk. BRF SA ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 257.00 in BRF SA ADR on January 25, 2024 and sell it today you would earn a total of 86.00 from holding BRF SA ADR or generate 33.46% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 99.8% |
Values | Daily Returns |
Adecoagro SA vs. BRF SA ADR
Performance |
Timeline |
Adecoagro SA |
BRF SA ADR |
Adecoagro and BRF SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Adecoagro and BRF SA
The main advantage of trading using opposite Adecoagro and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adecoagro 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.Adecoagro vs. Bunge Limited | Adecoagro vs. Archer Daniels Midland | Adecoagro vs. Fresh Del Monte | Adecoagro vs. Limoneira Co |
BRF SA vs. Bunge Limited | BRF SA vs. Archer Daniels Midland | BRF SA vs. Fresh Del Monte | BRF SA vs. Limoneira Co |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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