Correlation Between Global X and Petro Rio

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

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

Diversification Opportunities for Global X and Petro Rio

-0.37

Correlation Coefficient

Global X  Petro Rio

Very good diversification

The 3 months correlation between Global and Petro is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Global X Funds and Petro Rio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Rio SA and Global X 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 Global X Funds are associated (or correlated) with Petro Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Rio SA has no effect on the direction of Global X i.e., Global X and Petro Rio go up and down completely randomly.

Pair Corralation between Global X and Petro Rio

Assuming the 90 days trading horizon Global X Funds is expected to generate 0.68 times more return on investment than Petro Rio. However, Global X Funds is 1.47 times less risky than Petro Rio. It trades about 0.07 of its potential returns per unit of risk. Petro Rio SA is currently generating about 0.01 per unit of risk. If you would invest  3,102  in Global X Funds on October 23, 2024 and sell it today you would earn a total of  1,846  from holding Global X Funds or generate 59.51% return on investment over 90 days.

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

Global X Funds  vs.  Petro Rio SA

Global X Funds

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global X Funds are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Global X sustained solid returns over the last few months and may actually be approaching a breakup point.

Petro Rio SA

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Global X and Petro Rio

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

The idea behind Global X Funds and Petro Rio 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 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.