Correlation Between BRF SA and Raia Drogasil
Can any of the company-specific risk be diversified away by investing in both BRF SA and Raia Drogasil 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 Raia Drogasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRF SA and Raia Drogasil SA, you can compare the effects of market volatilities on BRF SA and Raia Drogasil 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 Raia Drogasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Raia Drogasil.
Diversification Opportunities for BRF SA and Raia Drogasil
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between BRF and Raia is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA and Raia Drogasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raia Drogasil 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 are associated (or correlated) with Raia Drogasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raia Drogasil SA has no effect on the direction of BRF SA i.e., BRF SA and Raia Drogasil go up and down completely randomly.
Pair Corralation between BRF SA and Raia Drogasil
Assuming the 90 days trading horizon BRF SA is expected to generate 2.19 times more return on investment than Raia Drogasil. However, BRF SA is 2.19 times more volatile than Raia Drogasil SA. It trades about 0.09 of its potential returns per unit of risk. Raia Drogasil SA is currently generating about 0.02 per unit of risk. If you would invest 811.00 in BRF SA on August 28, 2024 and sell it today you would earn a total of 1,710 from holding BRF SA or generate 210.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRF SA vs. Raia Drogasil SA
Performance |
| Timeline |
| BRF SA |
| Raia Drogasil SA |
BRF SA and Raia Drogasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRF SA and Raia Drogasil
The main advantage of trading using opposite BRF SA and Raia Drogasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA position performs unexpectedly, Raia Drogasil 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 Raia Drogasil will offset losses from the drop in Raia Drogasil's long position.The idea behind BRF SA and Raia Drogasil SA 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.| Raia Drogasil vs. Minerva SA | Raia Drogasil vs. Companhia Siderrgica Nacional | Raia Drogasil vs. Cyrela Brazil Realty |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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