Correlation Between General Mills and Marfrig Global

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

Diversification Opportunities for General Mills and Marfrig Global

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between General and Marfrig is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding General Mills and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods and General Mills 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 General Mills are associated (or correlated) with Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of General Mills i.e., General Mills and Marfrig Global go up and down completely randomly.

Pair Corralation between General Mills and Marfrig Global

Considering the 90-day investment horizon General Mills is expected to generate 3.97 times less return on investment than Marfrig Global. But when comparing it to its historical volatility, General Mills is 3.13 times less risky than Marfrig Global. It trades about 0.11 of its potential returns per unit of risk. Marfrig Global Foods is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  167.00  in Marfrig Global Foods on January 19, 2024 and sell it today you would earn a total of  32.00  from holding Marfrig Global Foods or generate 19.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy97.62%
ValuesDaily Returns

General Mills  vs.  Marfrig Global Foods

 Performance 
       Timeline  
General Mills 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in General Mills are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, General Mills may actually be approaching a critical reversion point that can send shares even higher in May 2024.
Marfrig Global Foods 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Marfrig Global showed solid returns over the last few months and may actually be approaching a breakup point.

General Mills and Marfrig Global Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Mills and Marfrig Global

The main advantage of trading using opposite General Mills and Marfrig Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Mills position performs unexpectedly, Marfrig Global 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 Marfrig Global will offset losses from the drop in Marfrig Global's long position.
The idea behind General Mills and Marfrig Global 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.

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