Correlation Between BRF SA and Planting Hope

Can any of the company-specific risk be diversified away by investing in both BRF SA and Planting Hope 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 BRF SA and Planting Hope into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BRF SA ADR and The Planting Hope, you can compare the effects of market volatilities on BRF SA and Planting Hope 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 BRF SA with a short position of Planting Hope. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Planting Hope.

Diversification Opportunities for BRF SA and Planting Hope

-0.18

Correlation Coefficient

BRF SA  Planting Hope

Good diversification

The 3 months correlation between BRF and Planting is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and The Planting Hope in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Planting Hope and BRF 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 BRF SA ADR are associated (or correlated) with Planting Hope. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Planting Hope has no effect on the direction of BRF SA i.e., BRF SA and Planting Hope go up and down completely randomly.

Pair Corralation between BRF SA and Planting Hope

Given the investment horizon of 90 days BRF SA is expected to generate 20.81 times less return on investment than Planting Hope. But when comparing it to its historical volatility, BRF SA ADR is 23.66 times less risky than Planting Hope. It trades about 0.09 of its potential returns per unit of risk. The Planting Hope is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  39.00  in The Planting Hope on September 13, 2024 and sell it today you would lose (38.90) from holding The Planting Hope or give up 99.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

BRF SA ADR  vs.  The Planting Hope

BRF SA ADR

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, BRF SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Planting Hope

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Planting Hope are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain forward-looking signals, Planting Hope reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BRF SA and Planting Hope

The main advantage of trading using opposite BRF SA and Planting Hope positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRF SA position performs unexpectedly, Planting Hope 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 Planting Hope will offset losses from the drop in Planting Hope's long position.

The idea behind BRF SA ADR and The Planting Hope 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.