Correlation Between Petroleo Brasileiro and Green Cross

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

Diversification Opportunities for Petroleo Brasileiro and Green Cross

-0.02

Correlation Coefficient

Petroleo Brasileiro  Green Cross

Good diversification

The 3 months correlation between Petroleo and Green is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Green Cross Lab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Cross Lab 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 Green Cross. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Cross Lab has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Green Cross go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Green Cross

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Green Cross. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.51 times less risky than Green Cross. The stock trades about -0.13 of its potential returns per unit of risk. The Green Cross Lab is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,630,000  in Green Cross Lab on September 20, 2024 and sell it today you would lose (110,000) from holding Green Cross Lab or give up 4.18% of portfolio value over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Green Cross Lab

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 unsteady 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.

Green Cross Lab

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Cross Lab has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Petroleo Brasileiro and Green Cross

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

The idea behind Petroleo Brasileiro Petrobras and Green Cross Lab 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.