Correlation Between Petroleo Brasileiro and First Copper

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

Diversification Opportunities for Petroleo Brasileiro and First Copper

0.22

Correlation Coefficient

Petroleo Brasileiro  First Copper

Modest diversification

The 3 months correlation between Petroleo and First is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and First Copper Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Copper Technology 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 First Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Copper Technology has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and First Copper go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and First Copper

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 15.38 times less return on investment than First Copper. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.58 times less risky than First Copper. It trades about 0.0 of its potential returns per unit of risk. First Copper Technology is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  3,950  in First Copper Technology on December 4, 2024 and sell it today you would earn a total of  140.00  from holding First Copper Technology or generate 3.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.33%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  First Copper Technology

Petroleo Brasileiro

Risk-Adjusted Performance

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.

First Copper Technology

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Copper Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, First Copper is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Petroleo Brasileiro and First Copper

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

The idea behind Petroleo Brasileiro Petrobras and First Copper Technology 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.