Correlation Between Petroleo Brasileiro and Bank of Qingdao

Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Bank of Qingdao 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 Bank of Qingdao 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 Bank of Qingdao, you can compare the effects of market volatilities on Petroleo Brasileiro and Bank of Qingdao 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 Bank of Qingdao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Bank of Qingdao.

Diversification Opportunities for Petroleo Brasileiro and Bank of Qingdao

-0.41

Correlation Coefficient

Petroleo Brasileiro  Bank of Qingdao

Very good diversification

The 3 months correlation between Petroleo and Bank is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Bank of Qingdao in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Qingdao 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 Bank of Qingdao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Qingdao has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Bank of Qingdao go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Bank of Qingdao

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Bank of Qingdao. In addition to that, Petroleo Brasileiro is 1.75 times more volatile than Bank of Qingdao. It trades about -0.24 of its total potential returns per unit of risk. Bank of Qingdao is currently generating about 0.23 per unit of volatility. If you would invest  364.00  in Bank of Qingdao on September 26, 2024 and sell it today you would earn a total of  20.00  from holding Bank of Qingdao or generate 5.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	91.3%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Bank of Qingdao

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

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 latest conflicting performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Bank of Qingdao

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Qingdao are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bank of Qingdao may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petroleo Brasileiro and Bank of Qingdao

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

The idea behind Petroleo Brasileiro Petrobras and Bank of Qingdao 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.