Correlation Between Petroleo Brasileiro and Taishin Financial

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

Diversification Opportunities for Petroleo Brasileiro and Taishin Financial

0.16

Correlation Coefficient

Petroleo Brasileiro  Taishin Financial

Average diversification

The 3 months correlation between Petroleo and Taishin is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Taishin Financial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taishin Financial Holding 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 Taishin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taishin Financial Holding has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Taishin Financial go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Taishin Financial

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Taishin Financial. In addition to that, Petroleo Brasileiro is 7.91 times more volatile than Taishin Financial Holding. It trades about -0.06 of its total potential returns per unit of risk. Taishin Financial Holding is currently generating about 0.07 per unit of volatility. If you would invest  5,100  in Taishin Financial Holding on September 19, 2024 and sell it today you would earn a total of  20.00  from holding Taishin Financial Holding or generate 0.39% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Taishin Financial Holding

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.

Taishin Financial Holding

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Petroleo Brasileiro and Taishin Financial

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

The idea behind Petroleo Brasileiro Petrobras and Taishin Financial Holding 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.