Correlation Between Petroleo Brasileiro and TCI

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

Diversification Opportunities for Petroleo Brasileiro and TCI

-0.28

Correlation Coefficient

Petroleo Brasileiro  TCI

Very good diversification

The 3 months correlation between Petroleo and TCI is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and TCI Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TCI Co 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 TCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TCI Co has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and TCI go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and TCI

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 1.75 times less return on investment than TCI. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.41 times less risky than TCI. It trades about 0.13 of its potential returns per unit of risk. TCI Co is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  12,500  in TCI Co on December 26, 2024 and sell it today you would earn a total of  2,800  from holding TCI Co or generate 22.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.8%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  TCI Co

Petroleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Petroleo Brasileiro reported solid returns over the last few months and may actually be approaching a breakup point.

TCI Co

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TCI Co are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, TCI showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and TCI

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

The idea behind Petroleo Brasileiro Petrobras and TCI Co 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..