Correlation Between Petroleo Brasileiro and Toyota Tsusho

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

Diversification Opportunities for Petroleo Brasileiro and Toyota Tsusho

-0.66

Correlation Coefficient

Petroleo Brasileiro  Toyota Tsusho

Excellent diversification

The 3 months correlation between Petroleo and Toyota is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Toyota Tsusho Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Toyota Tsusho 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 Toyota Tsusho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Toyota Tsusho Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Toyota Tsusho go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Toyota Tsusho

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Toyota Tsusho. In addition to that, Petroleo Brasileiro is 1.14 times more volatile than Toyota Tsusho Corp. It trades about -0.15 of its total potential returns per unit of risk. Toyota Tsusho Corp is currently generating about 0.09 per unit of volatility. If you would invest  1,570  in Toyota Tsusho Corp on December 4, 2024 and sell it today you would earn a total of  50.00  from holding Toyota Tsusho Corp or generate 3.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	90.91%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Toyota Tsusho Corp

Petroleo Brasileiro

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Toyota Tsusho Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Toyota Tsusho Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Toyota Tsusho is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Petroleo Brasileiro and Toyota Tsusho

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

The idea behind Petroleo Brasileiro Petrobras and Toyota Tsusho 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.