Correlation Between Petroleo Brasileiro and Sun Sea

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

Diversification Opportunities for Petroleo Brasileiro and Sun Sea

0.73

Correlation Coefficient

Petroleo Brasileiro  Sun Sea

Poor diversification

The 3 months correlation between Petroleo and Sun is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Sun Sea Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Sea Construction 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 Sun Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Sea Construction has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Sun Sea go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Sun Sea

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.04 times more return on investment than Sun Sea. However, Petroleo Brasileiro is 1.04 times more volatile than Sun Sea Construction. It trades about -0.05 of its potential returns per unit of risk. Sun Sea Construction is currently generating about -0.06 per unit of risk. If you would invest  1,403  in Petroleo Brasileiro Petrobras on September 18, 2024 and sell it today you would lose (74.00) from holding Petroleo Brasileiro Petrobras or give up 5.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Sun Sea Construction

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.

Sun Sea Construction

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sun Sea Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Sun Sea 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 Sun Sea

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

The idea behind Petroleo Brasileiro Petrobras and Sun Sea Construction 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.