Correlation Between BRF SA and Adecoagro

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

Diversification Opportunities for BRF SA and Adecoagro

0.44

Correlation Coefficient

BRF SA  Adecoagro

Very weak diversification

The 3 months correlation between BRF and Adecoagro is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Adecoagro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adecoagro SA 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 Adecoagro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adecoagro SA has no effect on the direction of BRF SA i.e., BRF SA and Adecoagro go up and down completely randomly.

Pair Corralation between BRF SA and Adecoagro

Given the investment horizon of 90 days BRF SA ADR is expected to under-perform the Adecoagro. In addition to that, BRF SA is 1.3 times more volatile than Adecoagro SA. It trades about -0.01 of its total potential returns per unit of risk. Adecoagro SA is currently generating about 0.08 per unit of volatility. If you would invest  1,037  in Adecoagro SA on January 19, 2024 and sell it today you would earn a total of  39.00  from holding Adecoagro SA or generate 3.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

BRF SA ADR  vs.  Adecoagro SA

BRF SA ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, BRF SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Adecoagro SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Adecoagro SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Adecoagro may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with BRF SA and Adecoagro

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

The idea behind BRF SA ADR and Adecoagro SA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.