Correlation Between So Martinho and Marfrig Global

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Can any of the company-specific risk be diversified away by investing in both So Martinho 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 So Martinho and Marfrig Global into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between So Martinho SA and Marfrig Global Foods, you can compare the effects of market volatilities on So Martinho 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 So Martinho with a short position of Marfrig Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of So Martinho and Marfrig Global.

Diversification Opportunities for So Martinho and Marfrig Global

-0.64
  Correlation Coefficient

Excellent diversification

The 3 months correlation between SMTO3 and Marfrig is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding So Martinho 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 So Martinho 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 So Martinho 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 So Martinho i.e., So Martinho and Marfrig Global go up and down completely randomly.

Pair Corralation between So Martinho and Marfrig Global

Assuming the 90 days trading horizon So Martinho is expected to generate 6.3 times less return on investment than Marfrig Global. But when comparing it to its historical volatility, So Martinho SA is 1.26 times less risky than Marfrig Global. It trades about 0.02 of its potential returns per unit of risk. Marfrig Global Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  684.00  in Marfrig Global Foods on September 10, 2024 and sell it today you would earn a total of  1,265  from holding Marfrig Global Foods or generate 184.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

So Martinho SA  vs.  Marfrig Global Foods

 Performance 
       Timeline  
So Martinho SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days So Martinho SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, So Martinho is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
Marfrig Global Foods 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Marfrig Global Foods are ranked lower than 17 (%) 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.

So Martinho and Marfrig Global Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with So Martinho and Marfrig Global

The main advantage of trading using opposite So Martinho and Marfrig Global positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if So Martinho 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 So Martinho 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.
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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