Correlation Between BRF SA and Ambev SA
Can any of the company-specific risk be diversified away by investing in both BRF SA and Ambev 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 BRF SA and Ambev SA 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 Ambev SA ADR, you can compare the effects of market volatilities on BRF SA and Ambev 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 BRF SA with a short position of Ambev SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Ambev SA.
Diversification Opportunities for BRF SA and Ambev SA
Excellent diversification
The 3 months correlation between BRF and Ambev is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Ambev SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ambev SA ADR 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 Ambev SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ambev SA ADR has no effect on the direction of BRF SA i.e., BRF SA and Ambev SA go up and down completely randomly.
Pair Corralation between BRF SA and Ambev SA
Given the investment horizon of 90 days BRF SA ADR is expected to generate 2.09 times more return on investment than Ambev SA. However, BRF SA is 2.09 times more volatile than Ambev SA ADR. It trades about 0.03 of its potential returns per unit of risk. Ambev SA ADR is currently generating about 0.0 per unit of risk. If you would invest 281.00 in BRF SA ADR on January 24, 2024 and sell it today you would earn a total of 53.00 from holding BRF SA ADR or generate 18.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 99.8% |
Values | Daily Returns |
BRF SA ADR vs. Ambev SA ADR
Performance |
Timeline |
BRF SA ADR |
Ambev SA ADR |
BRF SA and Ambev SA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BRF SA and Ambev SA
The main advantage of trading using opposite BRF SA and Ambev SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA position performs unexpectedly, Ambev 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 Ambev SA will offset losses from the drop in Ambev SA's long position.BRF SA vs. Bunge Limited | BRF SA vs. Archer Daniels Midland | BRF SA vs. Fresh Del Monte | BRF SA vs. Limoneira Co |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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