Correlation Between Petroleo Brasileiro and Beijing Shunxin

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

By analyzing existing cross correlation between Petroleo Brasileiro Petrobras and Beijing Shunxin Agriculture, you can compare the effects of market volatilities on Petroleo Brasileiro and Beijing Shunxin 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 Petroleo Brasileiro with a short position of Beijing Shunxin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Beijing Shunxin.

Diversification Opportunities for Petroleo Brasileiro and Beijing Shunxin

-0.75

Correlation Coefficient

Petroleo Brasileiro  Beijing Shunxin

Pay attention - limited upside

The 3 months correlation between Petroleo and Beijing is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Beijing Shunxin Agriculture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beijing Shunxin Agri and Petroleo 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 Petroleo Brasileiro Petrobras are associated (or correlated) with Beijing Shunxin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beijing Shunxin Agri has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Beijing Shunxin go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Beijing Shunxin

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Beijing Shunxin. In addition to that, Petroleo Brasileiro is 1.46 times more volatile than Beijing Shunxin Agriculture. It trades about -0.22 of its total potential returns per unit of risk. Beijing Shunxin Agriculture is currently generating about 0.09 per unit of volatility. If you would invest  1,680  in Beijing Shunxin Agriculture on December 5, 2024 and sell it today you would earn a total of  37.00  from holding Beijing Shunxin Agriculture or generate 2.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Beijing Shunxin Agriculture

Petroleo Brasileiro

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petroleo Brasileiro Petrobras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Petroleo Brasileiro is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Beijing Shunxin Agri

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijing Shunxin Agriculture has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Petroleo Brasileiro and Beijing Shunxin

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

The idea behind Petroleo Brasileiro Petrobras and Beijing Shunxin Agriculture 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.