Correlation Between BRF SA and Azul SA
Can any of the company-specific risk be diversified away by investing in both BRF SA and Azul 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 Azul 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 Azul SA, you can compare the effects of market volatilities on BRF SA and Azul 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 Azul SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Azul SA.
Diversification Opportunities for BRF SA and Azul SA
Good diversification
The 3 months correlation between BRF and Azul is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Azul SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azul 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 Azul SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azul SA has no effect on the direction of BRF SA i.e., BRF SA and Azul SA go up and down completely randomly.
Pair Corralation between BRF SA and Azul SA
Given the investment horizon of 90 days BRF SA ADR is expected to under-perform the Azul SA. But the stock apears to be less risky and, when comparing its historical volatility, BRF SA ADR is 1.9 times less risky than Azul SA. The stock trades about -0.09 of its potential returns per unit of risk. The Azul SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 265.00 in Azul SA on November 2, 2024 and sell it today you would lose (22.00) from holding Azul SA or give up 8.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRF SA ADR vs. Azul SA
Performance |
| Timeline |
| BRF SA ADR |
| Azul SA |
BRF SA and Azul SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRF SA and Azul SA
The main advantage of trading using opposite BRF SA and Azul SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA position performs unexpectedly, Azul 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 Azul SA will offset losses from the drop in Azul SA's long position.| BRF SA vs. Marfrig Global Foods | BRF SA vs. Pilgrims Pride Corp | BRF SA vs. John B Sanfilippo | BRF SA vs. Seneca Foods Corp |
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 Stocks Directory module to find actively traded stocks across global markets.
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