Correlation Between Petroleo Brasileiro and Fuh Hwa

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

Diversification Opportunities for Petroleo Brasileiro and Fuh Hwa

0.0

Correlation Coefficient

Petroleo Brasileiro  Fuh Hwa

Pay attention - limited upside

The 3 months correlation between Petroleo and Fuh is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Fuh Hwa Daily in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fuh Hwa Daily 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 Fuh Hwa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fuh Hwa Daily has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Fuh Hwa go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Fuh Hwa

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 2.16 times less return on investment than Fuh Hwa. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.29 times less risky than Fuh Hwa. It trades about 0.09 of its potential returns per unit of risk. Fuh Hwa Daily is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,176  in Fuh Hwa Daily on September 14, 2024 and sell it today you would earn a total of  91.00  from holding Fuh Hwa Daily or generate 7.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Fuh Hwa Daily

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 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.

Fuh Hwa Daily

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fuh Hwa Daily are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Fuh Hwa sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Fuh Hwa

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

The idea behind Petroleo Brasileiro Petrobras and Fuh Hwa Daily 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.