Correlation Between JBS SA and Marfrig Global

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

By analyzing existing cross correlation between JBS SA and Marfrig Global Foods, you can compare the effects of market volatilities on JBS SA 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 JBS SA with a short position of Marfrig Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of JBS SA and Marfrig Global.

Diversification Opportunities for JBS SA and Marfrig Global

0.48

Correlation Coefficient

JBS SA  Marfrig Global

Very weak diversification

The 3 months correlation between JBS and Marfrig is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding JBS SA 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 JBS 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 JBS SA 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 JBS SA i.e., JBS SA and Marfrig Global go up and down completely randomly.

Pair Corralation between JBS SA and Marfrig Global

Assuming the 90 days horizon JBS SA is expected to generate 6.04 times less return on investment than Marfrig Global. But when comparing it to its historical volatility, JBS SA is 1.5 times less risky than Marfrig Global. It trades about 0.04 of its potential returns per unit of risk. Marfrig Global Foods is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  236.00  in Marfrig Global Foods on September 3, 2024 and sell it today you would earn a total of  69.00  from holding Marfrig Global Foods or generate 29.24% return on investment over 90 days.

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

JBS SA  vs.  Marfrig Global Foods

JBS SA

Risk-Adjusted Performance

2 of 100

Weak

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

Marfrig Global Foods

Risk-Adjusted Performance

11 of 100

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.

Pair Trading with JBS SA and Marfrig Global

The main advantage of trading using opposite JBS SA and Marfrig Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if JBS SA 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.

The idea behind JBS SA 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.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.