Correlation Between Petroleo Brasileiro and TSEC Corp

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

Diversification Opportunities for Petroleo Brasileiro and TSEC Corp

-0.25

Correlation Coefficient

Petroleo Brasileiro  TSEC Corp

Very good diversification

The 3 months correlation between Petroleo and TSEC is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and TSEC Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TSEC 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 TSEC Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TSEC Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and TSEC Corp go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and TSEC Corp

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the TSEC Corp. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.47 times less risky than TSEC Corp. The stock trades about -0.21 of its potential returns per unit of risk. The TSEC Corp is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1,665  in TSEC Corp on December 4, 2024 and sell it today you would earn a total of  290.00  from holding TSEC Corp or generate 17.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  TSEC Corp

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.

TSEC Corp

Risk-Adjusted Performance

Very Weak

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

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

The idea behind Petroleo Brasileiro Petrobras and TSEC 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.