Correlation Between JM Smucker and BRF SA

Can any of the company-specific risk be diversified away by investing in both JM Smucker 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 JM Smucker and BRF SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between JM Smucker and BRF SA ADR, you can compare the effects of market volatilities on JM Smucker 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 JM Smucker with a short position of BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of JM Smucker and BRF SA.

Diversification Opportunities for JM Smucker and BRF SA

-0.53

Correlation Coefficient

JM Smucker  BRF SA

Excellent diversification

The 3 months correlation between SJM and BRF is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding JM Smucker 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 JM Smucker 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 JM Smucker 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 JM Smucker i.e., JM Smucker and BRF SA go up and down completely randomly.

Pair Corralation between JM Smucker and BRF SA

Considering the 90-day investment horizon JM Smucker is expected to under-perform the BRF SA. But the stock apears to be less risky and, when comparing its historical volatility, JM Smucker is 2.21 times less risky than BRF SA. The stock trades about -0.13 of its potential returns per unit of risk. The BRF SA ADR is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  269.00  in BRF SA ADR on February 23, 2024 and sell it today you would earn a total of  104.00  from holding BRF SA ADR or generate 38.66% return on investment over 90 days.

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

JM Smucker  vs.  BRF SA ADR

JM Smucker

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days JM Smucker has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's forward-looking indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

BRF SA ADR

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, BRF SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JM Smucker and BRF SA

The main advantage of trading using opposite JM Smucker and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JM Smucker 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 JM Smucker 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.