Correlation Between Raia Drogasil and JBS SA

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

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

Diversification Opportunities for Raia Drogasil and JBS SA

-0.57

Correlation Coefficient

Raia Drogasil  JBS SA

Excellent diversification

The 3 months correlation between Raia and JBS is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Raia Drogasil SA and JBS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JBS SA and Raia Drogasil 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 Raia Drogasil SA are associated (or correlated) with JBS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JBS SA has no effect on the direction of Raia Drogasil i.e., Raia Drogasil and JBS SA go up and down completely randomly.

Pair Corralation between Raia Drogasil and JBS SA

Assuming the 90 days trading horizon Raia Drogasil SA is expected to under-perform the JBS SA. But the stock apears to be less risky and, when comparing its historical volatility, Raia Drogasil SA is 1.24 times less risky than JBS SA. The stock trades about -0.1 of its potential returns per unit of risk. The JBS SA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,252  in JBS SA on September 12, 2024 and sell it today you would earn a total of  585.00  from holding JBS SA or generate 17.99% return on investment over 90 days.

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

Raia Drogasil SA  vs.  JBS SA

Raia Drogasil SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Raia Drogasil SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

JBS SA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JBS SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, JBS SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Raia Drogasil and JBS SA

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

The idea behind Raia Drogasil SA and JBS SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.