Correlation Between Premier Foods and BRF SA
Can any of the company-specific risk be diversified away by investing in both Premier Foods 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 Premier Foods and BRF SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Premier Foods Plc and BRF SA ADR, you can compare the effects of market volatilities on Premier Foods 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 Premier Foods with a short position of BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premier Foods and BRF SA.
Diversification Opportunities for Premier Foods and BRF SA
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Premier and BRF is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Premier Foods Plc and BRF SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA ADR and Premier Foods 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 Premier Foods Plc 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 ADR has no effect on the direction of Premier Foods i.e., Premier Foods and BRF SA go up and down completely randomly.
Pair Corralation between Premier Foods and BRF SA
Assuming the 90 days horizon Premier Foods is expected to generate 1.21 times less return on investment than BRF SA. But when comparing it to its historical volatility, Premier Foods Plc is 1.1 times less risky than BRF SA. It trades about 0.1 of its potential returns per unit of risk. BRF SA ADR is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 197.00 in BRF SA ADR on September 12, 2024 and sell it today you would earn a total of 286.00 from holding BRF SA ADR or generate 145.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 65.56% |
| Values | Daily Returns |
Premier Foods Plc vs. BRF SA ADR
Performance |
| Timeline |
| Premier Foods Plc |
| BRF SA ADR |
Premier Foods and BRF SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Premier Foods and BRF SA
The main advantage of trading using opposite Premier Foods and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Premier Foods 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.| Premier Foods vs. BRF SA ADR | Premier Foods vs. Pilgrims Pride Corp | Premier Foods vs. John B Sanfilippo | Premier Foods vs. Seneca Foods Corp |
| BRF SA vs. Marfrig Global Foods | BRF SA vs. Pilgrims Pride Corp | BRF SA vs. John B Sanfilippo | BRF SA vs. Seneca Foods 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |