Correlation Between Petroleo Brasileiro and Capital Securities

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

Diversification Opportunities for Petroleo Brasileiro and Capital Securities

-0.39

Correlation Coefficient

Petroleo Brasileiro  Capital Securities

Very good diversification

The 3 months correlation between Petroleo and Capital is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Capital Securities Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Securities Corp 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 Capital Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Securities Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Capital Securities go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Capital Securities

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Capital Securities. In addition to that, Petroleo Brasileiro is 1.65 times more volatile than Capital Securities Corp. It trades about -0.06 of its total potential returns per unit of risk. Capital Securities Corp is currently generating about 0.37 per unit of volatility. If you would invest  2,150  in Capital Securities Corp on September 18, 2024 and sell it today you would earn a total of  215.00  from holding Capital Securities Corp or generate 10.0% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Capital Securities Corp

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.

Capital Securities Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Securities Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Capital Securities showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Capital Securities

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

The idea behind Petroleo Brasileiro Petrobras and Capital Securities Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.