Correlation Between BRF SA and ConAgra Foods

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

Diversification Opportunities for BRF SA and ConAgra Foods

0.57

Correlation Coefficient

BRF SA  ConAgra Foods

Very weak diversification

The 3 months correlation between BRF and ConAgra is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods 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 ConAgra Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConAgra Foods has no effect on the direction of BRF SA i.e., BRF SA and ConAgra Foods go up and down completely randomly.

Pair Corralation between BRF SA and ConAgra Foods

Given the investment horizon of 90 days BRF SA ADR is expected to generate 2.7 times more return on investment than ConAgra Foods. However, BRF SA is 2.7 times more volatile than ConAgra Foods. It trades about 0.06 of its potential returns per unit of risk. ConAgra Foods is currently generating about -0.02 per unit of risk. If you would invest  323.00  in BRF SA ADR on February 5, 2024 and sell it today you would earn a total of  10.00  from holding BRF SA ADR or generate 3.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BRF SA ADR  vs.  ConAgra Foods

BRF SA ADR

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, BRF SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

ConAgra Foods

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ConAgra Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, ConAgra Foods may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with BRF SA and ConAgra Foods

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

The idea behind BRF SA ADR and ConAgra Foods 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..