Correlation Between Petroleo Brasileiro and American Films

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

Diversification Opportunities for Petroleo Brasileiro and American Films

0.15

Correlation Coefficient

Petroleo Brasileiro  American Films

Average diversification

The 3 months correlation between Petroleo and American is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and American Films in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Films 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 American Films. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Films has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and American Films go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and American Films

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 2.31 times less return on investment than American Films. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 10.33 times less risky than American Films. It trades about 0.07 of its potential returns per unit of risk. American Films is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  15.00  in American Films on October 10, 2024 and sell it today you would lose (4.00) from holding American Films or give up 26.67% of portfolio value over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  American Films

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.

American Films

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in American Films are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, American Films disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and American Films

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

The idea behind Petroleo Brasileiro Petrobras and American Films 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.