Correlation Between Patria Bank and Rompetrol Well

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

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

Diversification Opportunities for Patria Bank and Rompetrol Well

-0.39

Correlation Coefficient

Patria Bank  Rompetrol Well

Very good diversification

The 3 months correlation between Patria and Rompetrol is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Patria Bank SA and Rompetrol Well in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rompetrol Well and Patria Bank 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 Patria Bank SA are associated (or correlated) with Rompetrol Well. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rompetrol Well has no effect on the direction of Patria Bank i.e., Patria Bank and Rompetrol Well go up and down completely randomly.

Pair Corralation between Patria Bank and Rompetrol Well

Assuming the 90 days trading horizon Patria Bank is expected to generate 2.32 times less return on investment than Rompetrol Well. But when comparing it to its historical volatility, Patria Bank SA is 1.31 times less risky than Rompetrol Well. It trades about 0.01 of its potential returns per unit of risk. Rompetrol Well is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  57.00  in Rompetrol Well on December 28, 2024 and sell it today you would earn a total of  1.00  from holding Rompetrol Well or generate 1.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Patria Bank SA  vs.  Rompetrol Well

Patria Bank SA

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Patria Bank SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking signals, Patria Bank is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Rompetrol Well

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rompetrol Well are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Rompetrol Well is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Patria Bank and Rompetrol Well

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

The idea behind Patria Bank SA and Rompetrol Well 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.