Correlation Between Petroleo Brasileiro and STELLA JONES

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

Diversification Opportunities for Petroleo Brasileiro and STELLA JONES

0.38

Correlation Coefficient

Petroleo Brasileiro  STELLA JONES

Weak diversification

The 3 months correlation between Petroleo and STELLA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and STELLA JONES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STELLA JONES INC 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 STELLA JONES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STELLA JONES INC has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and STELLA JONES go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and STELLA JONES

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the STELLA JONES. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.19 times less risky than STELLA JONES. The stock trades about -0.22 of its potential returns per unit of risk. The STELLA JONES INC is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,672  in STELLA JONES INC on September 24, 2024 and sell it today you would earn a total of  48.00  from holding STELLA JONES INC or generate 1.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  STELLA JONES INC

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 latest unsteady performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

STELLA JONES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STELLA JONES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Petroleo Brasileiro and STELLA JONES

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

The idea behind Petroleo Brasileiro Petrobras and STELLA JONES INC 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.