Correlation Between Marfrig Global and Equity Residential

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

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

Diversification Opportunities for Marfrig Global and Equity Residential

0.68

Correlation Coefficient

Marfrig Global  Equity Residential

Poor diversification

The 3 months correlation between Marfrig and Equity is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Marfrig Global Foods and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential and Marfrig Global 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 Marfrig Global Foods are associated (or correlated) with Equity Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Residential has no effect on the direction of Marfrig Global i.e., Marfrig Global and Equity Residential go up and down completely randomly.

Pair Corralation between Marfrig Global and Equity Residential

Assuming the 90 days trading horizon Marfrig Global Foods is expected to generate 1.18 times more return on investment than Equity Residential. However, Marfrig Global is 1.18 times more volatile than Equity Residential. It trades about 0.21 of its potential returns per unit of risk. Equity Residential is currently generating about 0.05 per unit of risk. If you would invest  1,206  in Marfrig Global Foods on September 23, 2024 and sell it today you would earn a total of  474.00  from holding Marfrig Global Foods or generate 39.3% return on investment over 90 days.

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

Marfrig Global Foods  vs.  Equity Residential

Marfrig Global Foods

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Marfrig Global unveiled solid returns over the last few months and may actually be approaching a breakup point.

Equity Residential

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Equity Residential are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Equity Residential may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Marfrig Global and Equity Residential

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

The idea behind Marfrig Global Foods and Equity Residential 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.