Correlation Between BRF SA and Volaris
Can any of the company-specific risk be diversified away by investing in both BRF SA and Volaris 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 Volaris 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 Volaris, you can compare the effects of market volatilities on BRF SA and Volaris 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 Volaris. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Volaris.
Diversification Opportunities for BRF SA and Volaris
Good diversification
The 3 months correlation between BRF and Volaris is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Volaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volaris 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 Volaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volaris has no effect on the direction of BRF SA i.e., BRF SA and Volaris go up and down completely randomly.
Pair Corralation between BRF SA and Volaris
Given the investment horizon of 90 days BRF SA ADR is expected to under-perform the Volaris. But the stock apears to be less risky and, when comparing its historical volatility, BRF SA ADR is 1.1 times less risky than Volaris. The stock trades about -0.03 of its potential returns per unit of risk. The Volaris is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 566.00 in Volaris on August 31, 2024 and sell it today you would earn a total of 201.00 from holding Volaris or generate 35.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRF SA ADR vs. Volaris
Performance |
| Timeline |
| BRF SA ADR |
| Volaris |
BRF SA and Volaris Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRF SA and Volaris
The main advantage of trading using opposite BRF SA and Volaris positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA position performs unexpectedly, Volaris 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 Volaris will offset losses from the drop in Volaris' 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 |
| Volaris vs. Allegiant Travel | Volaris vs. Azul SA | Volaris vs. Alaska Air Group | Volaris vs. International Consolidated Airlines |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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