Correlation Between Petroleo Brasileiro and Fubon SP

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

Diversification Opportunities for Petroleo Brasileiro and Fubon SP

0.47

Correlation Coefficient

Petroleo Brasileiro  Fubon SP

Very weak diversification

The 3 months correlation between Petroleo and Fubon is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Fubon SP Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fubon SP Preferred 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 Fubon SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fubon SP Preferred has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Fubon SP go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Fubon SP

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Fubon SP. In addition to that, Petroleo Brasileiro is 2.93 times more volatile than Fubon SP Preferred. It trades about -0.04 of its total potential returns per unit of risk. Fubon SP Preferred is currently generating about -0.03 per unit of volatility. If you would invest  1,642  in Fubon SP Preferred on September 17, 2024 and sell it today you would lose (16.00) from holding Fubon SP Preferred or give up 0.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.92%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Fubon SP Preferred

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Fubon SP Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fubon SP Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fubon SP is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Petroleo Brasileiro and Fubon SP

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

The idea behind Petroleo Brasileiro Petrobras and Fubon SP Preferred 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.