Correlation Between Gafisa SA and Petro Rio

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

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

Diversification Opportunities for Gafisa SA and Petro Rio

0.19

Correlation Coefficient

Gafisa SA  Petro Rio

Average diversification

The 3 months correlation between Gafisa and Petro is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Gafisa SA 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 Gafisa SA 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 Gafisa SA 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 Gafisa SA i.e., Gafisa SA and Petro Rio go up and down completely randomly.

Pair Corralation between Gafisa SA and Petro Rio

Assuming the 90 days trading horizon Gafisa SA is expected to under-perform the Petro Rio. In addition to that, Gafisa SA is 4.01 times more volatile than Petro Rio SA. It trades about -0.05 of its total potential returns per unit of risk. Petro Rio SA is currently generating about 0.03 per unit of volatility. If you would invest  4,192  in Petro Rio SA on October 20, 2024 and sell it today you would earn a total of  79.00  from holding Petro Rio SA or generate 1.88% return on investment over 90 days.

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

Gafisa SA  vs.  Petro Rio SA

Gafisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gafisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Petro Rio SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petro Rio SA are ranked lower than 2 (%) 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 Gafisa SA and Petro Rio

The main advantage of trading using opposite Gafisa SA and Petro Rio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gafisa SA 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 Gafisa SA 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.