Correlation Between Oil Terminal and Ropharma Bras

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

By analyzing existing cross correlation between Oil Terminal C and Ropharma Bras, you can compare the effects of market volatilities on Oil Terminal and Ropharma Bras 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 Oil Terminal with a short position of Ropharma Bras. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oil Terminal and Ropharma Bras.

Diversification Opportunities for Oil Terminal and Ropharma Bras

-0.23

Correlation Coefficient

Oil Terminal  Ropharma Bras

Very good diversification

The 3 months correlation between Oil and Ropharma is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Oil Terminal C and Ropharma Bras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ropharma Bras and Oil Terminal 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 Oil Terminal C are associated (or correlated) with Ropharma Bras. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ropharma Bras has no effect on the direction of Oil Terminal i.e., Oil Terminal and Ropharma Bras go up and down completely randomly.

Pair Corralation between Oil Terminal and Ropharma Bras

Assuming the 90 days trading horizon Oil Terminal is expected to generate 2.16 times less return on investment than Ropharma Bras. But when comparing it to its historical volatility, Oil Terminal C is 1.48 times less risky than Ropharma Bras. It trades about 0.01 of its potential returns per unit of risk. Ropharma Bras is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  17.00  in Ropharma Bras on September 27, 2024 and sell it today you would earn a total of  0.00  from holding Ropharma Bras or generate 0.0% return on investment over 90 days.

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

Oil Terminal C  vs.  Ropharma Bras

Oil Terminal C

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oil Terminal C has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Oil Terminal is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ropharma Bras

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Ropharma Bras has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Ropharma Bras is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Oil Terminal and Ropharma Bras

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

The idea behind Oil Terminal C and Ropharma Bras 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.