Correlation Between Alico and BRF SA

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Can any of the company-specific risk be diversified away by investing in both Alico 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 Alico and BRF SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alico Inc and BRF SA ADR, you can compare the effects of market volatilities on Alico 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 Alico with a short position of BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alico and BRF SA.

Diversification Opportunities for Alico and BRF SA

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Alico and BRF is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Alico Inc 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 Alico 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 Alico Inc 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 Alico i.e., Alico and BRF SA go up and down completely randomly.

Pair Corralation between Alico and BRF SA

Given the investment horizon of 90 days Alico Inc is expected to generate 0.93 times more return on investment than BRF SA. However, Alico Inc is 1.07 times less risky than BRF SA. It trades about 0.18 of its potential returns per unit of risk. BRF SA ADR is currently generating about 0.07 per unit of risk. If you would invest  2,751  in Alico Inc on December 29, 2023 and sell it today you would earn a total of  184.00  from holding Alico Inc or generate 6.69% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alico Inc  vs.  BRF SA ADR

 Performance 
       Timeline  
Alico Inc 

Risk-Adjusted Performance

1 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Alico Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Alico is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
BRF SA ADR 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, BRF SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alico and BRF SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alico and BRF SA

The main advantage of trading using opposite Alico and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alico 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 Alico Inc 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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