Correlation Between Petroleo Brasileiro and Walker Dunlop

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

Diversification Opportunities for Petroleo Brasileiro and Walker Dunlop

-0.17

Correlation Coefficient

Petroleo Brasileiro  Walker Dunlop

Good diversification

The 3 months correlation between Petroleo and Walker is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Walker Dunlop in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walker Dunlop 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 Walker Dunlop. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walker Dunlop has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Walker Dunlop go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Walker Dunlop

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Walker Dunlop. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.17 times less risky than Walker Dunlop. The stock trades about -0.01 of its potential returns per unit of risk. The Walker Dunlop is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8,679  in Walker Dunlop on September 22, 2024 and sell it today you would earn a total of  821.00  from holding Walker Dunlop or generate 9.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.71%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Walker Dunlop

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.

Walker Dunlop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Walker Dunlop has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Walker Dunlop is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Petroleo Brasileiro and Walker Dunlop

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

The idea behind Petroleo Brasileiro Petrobras and Walker Dunlop 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.