Correlation Between BRF SA and Danone SA
Can any of the company-specific risk be diversified away by investing in both BRF SA and Danone 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 Danone 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 Danone SA, you can compare the effects of market volatilities on BRF SA and Danone 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 Danone SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Danone SA.
Diversification Opportunities for BRF SA and Danone SA
Good diversification
The 3 months correlation between BRF and Danone is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Danone SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Danone 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 Danone SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Danone SA has no effect on the direction of BRF SA i.e., BRF SA and Danone SA go up and down completely randomly.
Pair Corralation between BRF SA and Danone SA
Given the investment horizon of 90 days BRF SA ADR is expected to generate 2.17 times more return on investment than Danone SA. However, BRF SA is 2.17 times more volatile than Danone SA. It trades about 0.15 of its potential returns per unit of risk. Danone SA is currently generating about -0.08 per unit of risk. If you would invest 406.00 in BRF SA ADR on September 13, 2024 and sell it today you would earn a total of 61.00 from holding BRF SA ADR or generate 15.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
BRF SA ADR vs. Danone SA
Performance |
| Timeline |
| BRF SA ADR |
| Danone SA |
BRF SA and Danone SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRF SA and Danone SA
The main advantage of trading using opposite BRF SA and Danone SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA position performs unexpectedly, Danone 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 Danone SA will offset losses from the drop in Danone 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 |
| Danone SA vs. BRF SA ADR | Danone SA vs. Pilgrims Pride Corp | Danone SA vs. John B Sanfilippo | Danone 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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