Correlation Between INTERNATIONAL and Marfrig Global

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Can any of the company-specific risk be diversified away by investing in both INTERNATIONAL 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 INTERNATIONAL and Marfrig Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INTERNATIONAL PAPER 44 and Marfrig Global Foods, you can compare the effects of market volatilities on INTERNATIONAL 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 INTERNATIONAL with a short position of Marfrig Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of INTERNATIONAL and Marfrig Global.

Diversification Opportunities for INTERNATIONAL and Marfrig Global

-0.03
  Correlation Coefficient

Good diversification

The 3 months correlation between INTERNATIONAL and Marfrig is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding INTERNATIONAL PAPER 44 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 INTERNATIONAL 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 INTERNATIONAL PAPER 44 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 INTERNATIONAL i.e., INTERNATIONAL and Marfrig Global go up and down completely randomly.

Pair Corralation between INTERNATIONAL and Marfrig Global

Assuming the 90 days trading horizon INTERNATIONAL PAPER 44 is expected to generate 39.84 times more return on investment than Marfrig Global. However, INTERNATIONAL is 39.84 times more volatile than Marfrig Global Foods. It trades about 0.12 of its potential returns per unit of risk. Marfrig Global Foods is currently generating about 0.07 per unit of risk. If you would invest  8,747  in INTERNATIONAL PAPER 44 on September 3, 2024 and sell it today you would lose (830.00) from holding INTERNATIONAL PAPER 44 or give up 9.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy35.15%
ValuesDaily Returns

INTERNATIONAL PAPER 44  vs.  Marfrig Global Foods

 Performance 
       Timeline  
INTERNATIONAL PAPER 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days INTERNATIONAL PAPER 44 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for INTERNATIONAL PAPER 44 investors.
Marfrig Global Foods 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Marfrig Global showed solid returns over the last few months and may actually be approaching a breakup point.

INTERNATIONAL and Marfrig Global Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with INTERNATIONAL and Marfrig Global

The main advantage of trading using opposite INTERNATIONAL and Marfrig Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTERNATIONAL 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.
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The idea behind INTERNATIONAL PAPER 44 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.
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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