Correlation Between Post Holdings and Marfrig Global

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

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

Diversification Opportunities for Post Holdings and Marfrig Global

0.35

Correlation Coefficient

Post Holdings  Marfrig Global

Weak diversification

The 3 months correlation between Post and Marfrig is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Post Holdings 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 Post Holdings 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 Post Holdings 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 Post Holdings i.e., Post Holdings and Marfrig Global go up and down completely randomly.

Pair Corralation between Post Holdings and Marfrig Global

Given the investment horizon of 90 days Post Holdings is expected to generate 9.12 times less return on investment than Marfrig Global. But when comparing it to its historical volatility, Post Holdings is 2.79 times less risky than Marfrig Global. It trades about 0.05 of its potential returns per unit of risk. Marfrig Global Foods is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  248.00  in Marfrig Global Foods on September 13, 2024 and sell it today you would earn a total of  75.00  from holding Marfrig Global Foods or generate 30.24% return on investment over 90 days.

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

Post Holdings  vs.  Marfrig Global Foods

Post Holdings

Risk-Adjusted Performance

3 of 100

Modest

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

Marfrig Global Foods

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 12 (%) 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 Post Holdings and Marfrig Global

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

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