Correlation Between BRF SA and Premier Foods

Can any of the company-specific risk be diversified away by investing in both BRF SA and Premier Foods 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 Premier Foods 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 Premier Foods Plc, you can compare the effects of market volatilities on BRF SA and Premier Foods 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 Premier Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRF SA and Premier Foods.

Diversification Opportunities for BRF SA and Premier Foods

-0.42

Correlation Coefficient

BRF SA  Premier Foods

Very good diversification

The 3 months correlation between BRF and Premier is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding BRF SA ADR and Premier Foods Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premier Foods Plc 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 Premier Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premier Foods Plc has no effect on the direction of BRF SA i.e., BRF SA and Premier Foods go up and down completely randomly.

Pair Corralation between BRF SA and Premier Foods

Given the investment horizon of 90 days BRF SA ADR is expected to generate 4.14 times more return on investment than Premier Foods. However, BRF SA is 4.14 times more volatile than Premier Foods Plc. It trades about 0.21 of its potential returns per unit of risk. Premier Foods Plc is currently generating about -0.22 per unit of risk. If you would invest  419.00  in BRF SA ADR on September 14, 2024 and sell it today you would earn a total of  46.00  from holding BRF SA ADR or generate 10.98% return on investment over 90 days.

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

BRF SA ADR  vs.  Premier Foods Plc

BRF SA ADR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BRF SA ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, BRF SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Premier Foods Plc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Premier Foods Plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Premier Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BRF SA and Premier Foods

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

The idea behind BRF SA ADR and Premier Foods Plc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.