Correlation Between Nestlé SA and BRF SA
Can any of the company-specific risk be diversified away by investing in both Nestlé SA and BRF 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 Nestlé SA and BRF SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nestl SA and BRF SA, you can compare the effects of market volatilities on Nestlé SA and BRF 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 Nestlé SA with a short position of BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nestlé SA and BRF SA.
Diversification Opportunities for Nestlé SA and BRF SA
Very good diversification
The 3 months correlation between Nestlé and BRF is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nestl SA and BRF SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA and Nestlé 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 Nestl SA are associated (or correlated) with BRF SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRF SA has no effect on the direction of Nestlé SA i.e., Nestlé SA and BRF SA go up and down completely randomly.
Pair Corralation between Nestlé SA and BRF SA
Assuming the 90 days trading horizon Nestl SA is expected to generate 0.39 times more return on investment than BRF SA. However, Nestl SA is 2.57 times less risky than BRF SA. It trades about -0.02 of its potential returns per unit of risk. BRF SA is currently generating about -0.43 per unit of risk. If you would invest 8,080 in Nestl SA on October 12, 2024 and sell it today you would lose (40.00) from holding Nestl SA or give up 0.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nestl SA vs. BRF SA
Performance |
| Timeline |
| Nestlé SA |
| BRF SA |
Nestlé SA and BRF SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nestlé SA and BRF SA
The main advantage of trading using opposite Nestlé SA and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nestlé SA position performs unexpectedly, BRF 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 BRF SA will offset losses from the drop in BRF SA's long position.| Nestlé SA vs. Rayonier Advanced Materials | Nestlé SA vs. LG Display Co | Nestlé SA vs. EAGLE MATERIALS | Nestlé SA vs. Vulcan Materials |
| BRF SA vs. Thai Beverage Public | BRF SA vs. National Beverage Corp | BRF SA vs. Austevoll Seafood ASA | BRF SA vs. Apollo Investment 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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