Correlation Between JBS SA and Pilgrims Pride

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

By analyzing existing cross correlation between JBS SA and Pilgrims Pride Corp, you can compare the effects of market volatilities on JBS SA and Pilgrims Pride 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 Pilgrims Pride. Check out your portfolio center. Please also check ongoing floating volatility patterns of JBS SA and Pilgrims Pride.

Diversification Opportunities for JBS SA and Pilgrims Pride

0.5

Correlation Coefficient

JBS SA  Pilgrims Pride

Very weak diversification

The 3 months correlation between JBS and Pilgrims is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding JBS SA and Pilgrims Pride Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilgrims Pride Corp 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 Pilgrims Pride. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilgrims Pride Corp has no effect on the direction of JBS SA i.e., JBS SA and Pilgrims Pride go up and down completely randomly.

Pair Corralation between JBS SA and Pilgrims Pride

Assuming the 90 days horizon JBS SA is expected to generate 2.9 times less return on investment than Pilgrims Pride. But when comparing it to its historical volatility, JBS SA is 1.17 times less risky than Pilgrims Pride. It trades about 0.04 of its potential returns per unit of risk. Pilgrims Pride Corp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,581  in Pilgrims Pride Corp on September 3, 2024 and sell it today you would earn a total of  580.00  from holding Pilgrims Pride Corp or generate 12.66% 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.  Pilgrims Pride Corp

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.

Pilgrims Pride Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pilgrims Pride Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Pilgrims Pride exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with JBS SA and Pilgrims Pride

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

The idea behind JBS SA and Pilgrims Pride Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.