Correlation Between BRF SA and Flowers Foods
Can any of the company-specific risk be diversified away by investing in both BRF SA and Flowers 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 Flowers 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 Flowers Foods, you can compare the effects of market volatilities on BRF SA and Flowers 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 Flowers Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Flowers Foods.
Diversification Opportunities for BRF SA and Flowers Foods
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BRF and Flowers is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Flowers Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flowers 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 Flowers Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flowers Foods has no effect on the direction of BRF SA i.e., BRF SA and Flowers Foods go up and down completely randomly.
Pair Corralation between BRF SA and Flowers Foods
Given the investment horizon of 90 days BRF SA ADR is expected to generate 2.5 times more return on investment than Flowers Foods. However, BRF SA is 2.5 times more volatile than Flowers Foods. It trades about 0.08 of its potential returns per unit of risk. Flowers Foods is currently generating about -0.04 per unit of risk. If you would invest 133.00 in BRF SA ADR on November 2, 2024 and sell it today you would earn a total of 242.00 from holding BRF SA ADR or generate 181.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRF SA ADR vs. Flowers Foods
Performance |
| Timeline |
| BRF SA ADR |
| Flowers Foods |
BRF SA and Flowers Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRF SA and Flowers Foods
The main advantage of trading using opposite BRF SA and Flowers Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA position performs unexpectedly, Flowers 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 Flowers Foods will offset losses from the drop in Flowers Foods' 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 |
| Flowers Foods vs. ConAgra Foods | Flowers Foods vs. McCormick Company Incorporated | Flowers Foods vs. Campbell Soup | Flowers Foods vs. Kellanova |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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