Correlation Between Petroleo Brasileiro and Poongsan

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

Diversification Opportunities for Petroleo Brasileiro and Poongsan

0.2

Correlation Coefficient

Petroleo Brasileiro  Poongsan

Modest diversification

The 3 months correlation between Petroleo and Poongsan is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Poongsan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Poongsan 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 Poongsan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Poongsan has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Poongsan go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Poongsan

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 2.31 times less return on investment than Poongsan. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.91 times less risky than Poongsan. It trades about 0.13 of its potential returns per unit of risk. Poongsan is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  4,775,625  in Poongsan on December 29, 2024 and sell it today you would earn a total of  1,384,375  from holding Poongsan or generate 28.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.08%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Poongsan

Petroleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Petroleo Brasileiro reported solid returns over the last few months and may actually be approaching a breakup point.

Poongsan

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Poongsan are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Poongsan sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Poongsan

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

The idea behind Petroleo Brasileiro Petrobras and Poongsan 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.