Correlation Between Petrleo Brasileiro and Dreyfus Natural

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

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

Diversification Opportunities for Petrleo Brasileiro and Dreyfus Natural

0.32

Correlation Coefficient

Petrleo Brasileiro  Dreyfus Natural

Weak diversification

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

Pair Corralation between Petrleo Brasileiro and Dreyfus Natural

Assuming the 90 days horizon Petrleo Brasileiro SA is expected to generate 1.17 times more return on investment than Dreyfus Natural. However, Petrleo Brasileiro is 1.17 times more volatile than Dreyfus Natural Resources. It trades about 0.12 of its potential returns per unit of risk. Dreyfus Natural Resources is currently generating about -0.04 per unit of risk. 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

Petrleo Brasileiro SA  vs.  Dreyfus Natural Resources

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.

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.

Pair Trading with Petrleo Brasileiro and Dreyfus Natural

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

The idea behind Petrleo Brasileiro SA and Dreyfus Natural Resources 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.