Correlation Between Petroleo Brasileiro and Baillie Gifford

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

Diversification Opportunities for Petroleo Brasileiro and Baillie Gifford

-0.32

Correlation Coefficient

Petroleo Brasileiro  Baillie Gifford

Very good diversification

The 3 months correlation between Petroleo and Baillie is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Baillie Gifford China in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baillie Gifford China 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 Baillie Gifford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baillie Gifford China has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Baillie Gifford go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Baillie Gifford

If you would invest  1,372  in Petroleo Brasileiro Petrobras on September 13, 2024 and sell it today you would earn a total of  88.00  from holding Petroleo Brasileiro Petrobras or generate 6.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Baillie Gifford China

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Baillie Gifford China

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Baillie Gifford China are ranked lower than 15 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward-looking signals, Baillie Gifford showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Baillie Gifford

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

The idea behind Petroleo Brasileiro Petrobras and Baillie Gifford China 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.