Correlation Between M Dias and Marfrig Global
Can any of the company-specific risk be diversified away by investing in both M Dias and Marfrig Global 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 M Dias and Marfrig Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between M Dias Branco and Marfrig Global Foods, you can compare the effects of market volatilities on M Dias and Marfrig Global 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 M Dias with a short position of Marfrig Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of M Dias and Marfrig Global.
Diversification Opportunities for M Dias and Marfrig Global
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MDIA3 and Marfrig is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding M Dias Branco and Marfrig Global Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marfrig Global Foods and M Dias 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 M Dias Branco are associated (or correlated) with Marfrig Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marfrig Global Foods has no effect on the direction of M Dias i.e., M Dias and Marfrig Global go up and down completely randomly.
Pair Corralation between M Dias and Marfrig Global
Assuming the 90 days trading horizon M Dias Branco is expected to under-perform the Marfrig Global. In addition to that, M Dias is 1.25 times more volatile than Marfrig Global Foods. It trades about -0.17 of its total potential returns per unit of risk. Marfrig Global Foods is currently generating about 0.41 per unit of volatility. If you would invest 1,520 in Marfrig Global Foods on August 30, 2024 and sell it today you would earn a total of 355.00 from holding Marfrig Global Foods or generate 23.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
M Dias Branco vs. Marfrig Global Foods
Performance |
| Timeline |
| M Dias Branco |
| Marfrig Global Foods |
M Dias and Marfrig Global Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with M Dias and Marfrig Global
The main advantage of trading using opposite M Dias and Marfrig Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if M Dias position performs unexpectedly, Marfrig Global 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 Marfrig Global will offset losses from the drop in Marfrig Global's long position.The idea behind M Dias Branco and Marfrig Global Foods 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.| Marfrig Global vs. BRF SA | Marfrig Global vs. Companhia Siderrgica Nacional | Marfrig Global 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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