Correlation Between Dreyfus Natural and Petrleo Brasileiro

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

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

Diversification Opportunities for Dreyfus Natural and Petrleo Brasileiro

0.32

Correlation Coefficient

Dreyfus Natural  Petrleo Brasileiro

Weak diversification

The 3 months correlation between Dreyfus and Petrleo is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Dreyfus Natural Resources and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrleo Brasileiro and Dreyfus Natural 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 Dreyfus Natural Resources are associated (or correlated) with Petrleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrleo Brasileiro has no effect on the direction of Dreyfus Natural i.e., Dreyfus Natural and Petrleo Brasileiro go up and down completely randomly.

Pair Corralation between Dreyfus Natural and Petrleo Brasileiro

Assuming the 90 days horizon Dreyfus Natural Resources is expected to under-perform the Petrleo Brasileiro. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dreyfus Natural Resources is 1.17 times less risky than Petrleo Brasileiro. The mutual fund trades about -0.04 of its potential returns per unit of risk. The Petrleo Brasileiro SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,173  in Petrleo Brasileiro SA on December 30, 2024 and sell it today you would earn a total of  132.00  from holding Petrleo Brasileiro SA or generate 11.25% return on investment over 90 days.

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

Dreyfus Natural Resources  vs.  Petrleo Brasileiro SA

Dreyfus Natural Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dreyfus Natural Resources has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong fundamental indicators, Dreyfus Natural is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Petrleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petrleo Brasileiro SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Petrleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dreyfus Natural and Petrleo Brasileiro

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

The idea behind Dreyfus Natural Resources and Petrleo 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.