Correlation Between BRF SA and Vale SA
Can any of the company-specific risk be diversified away by investing in both BRF SA and Vale 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 Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRF SA and Vale SA, you can compare the effects of market volatilities on BRF SA and Vale 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Vale SA.
Diversification Opportunities for BRF SA and Vale SA
Good diversification
The 3 months correlation between BRF and Vale is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of BRF SA i.e., BRF SA and Vale SA go up and down completely randomly.
Pair Corralation between BRF SA and Vale SA
Assuming the 90 days trading horizon BRF SA is expected to generate 1.57 times more return on investment than Vale SA. However, BRF SA is 1.57 times more volatile than Vale SA. It trades about -0.01 of its potential returns per unit of risk. Vale SA is currently generating about -0.23 per unit of risk. If you would invest 2,492 in BRF SA on August 31, 2024 and sell it today you would lose (33.00) from holding BRF SA or give up 1.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRF SA vs. Vale SA
Performance |
| Timeline |
| BRF SA |
| Vale SA |
BRF SA and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRF SA and Vale SA
The main advantage of trading using opposite BRF SA and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA position performs unexpectedly, Vale 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 Vale SA will offset losses from the drop in Vale SA's long position.| BRF SA vs. Companhia Siderrgica Nacional | BRF SA vs. Cyrela Brazil Realty | BRF SA vs. Fras le SA | BRF SA vs. Energisa SA |
| Vale SA vs. Petrleo Brasileiro SA | Vale SA vs. Banco do Brasil | Vale SA vs. Ita Unibanco Holding | Vale SA vs. Banco Bradesco SA |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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