Correlation Between Caixabank and Petroleo Brasileiro

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

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

Diversification Opportunities for Caixabank and Petroleo Brasileiro

0.84

Correlation Coefficient

Caixabank  Petroleo Brasileiro

Very poor diversification

The 3 months correlation between Caixabank and Petroleo is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA and Petroleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Caixabank 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 Caixabank SA are associated (or correlated) with Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of Caixabank i.e., Caixabank and Petroleo Brasileiro go up and down completely randomly.

Pair Corralation between Caixabank and Petroleo Brasileiro

Assuming the 90 days trading horizon Caixabank SA is expected to generate 0.76 times more return on investment than Petroleo Brasileiro. However, Caixabank SA is 1.32 times less risky than Petroleo Brasileiro. It trades about 0.3 of its potential returns per unit of risk. Petroleo Brasileiro SA is currently generating about 0.08 per unit of risk. If you would invest  516.00  in Caixabank SA on December 1, 2024 and sell it today you would earn a total of  153.00  from holding Caixabank SA or generate 29.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Caixabank SA  vs.  Petroleo Brasileiro SA

Caixabank SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Caixabank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Petroleo Brasileiro

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Petroleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Caixabank and Petroleo Brasileiro

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

The idea behind Caixabank SA and Petroleo Brasileiro 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.