Correlation Between Vale SA and BRF SA
Can any of the company-specific risk be diversified away by investing in both Vale 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 Vale 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 Vale SA and BRF SA, you can compare the effects of market volatilities on Vale 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 Vale SA with a short position of BRF SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and BRF SA.
Diversification Opportunities for Vale SA and BRF SA
Very good diversification
The 3 months correlation between Vale and BRF is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and BRF SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRF SA and Vale 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 Vale 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 Vale SA i.e., Vale SA and BRF SA go up and down completely randomly.
Pair Corralation between Vale SA and BRF SA
Assuming the 90 days trading horizon Vale SA is expected to under-perform the BRF SA. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA is 1.47 times less risky than BRF SA. The stock trades about -0.02 of its potential returns per unit of risk. The BRF SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 717.00 in BRF SA on August 27, 2024 and sell it today you would earn a total of 1,804 from holding BRF SA or generate 251.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.56% |
| Values | Daily Returns |
Vale SA vs. BRF SA
Performance |
| Timeline |
| Vale SA |
| BRF SA |
Vale SA and BRF SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and BRF SA
The main advantage of trading using opposite Vale SA and BRF SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale 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.| 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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