Correlation Between Petroleo Brasileiro and Bayerische Motoren

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

Diversification Opportunities for Petroleo Brasileiro and Bayerische Motoren

0.02

Correlation Coefficient

Petroleo Brasileiro  Bayerische Motoren

Significant diversification

The 3 months correlation between Petroleo and Bayerische is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Bayerische Motoren Werke in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayerische Motoren Werke 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 Bayerische Motoren. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayerische Motoren Werke has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Bayerische Motoren go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Bayerische Motoren

If you would invest  161,422  in Bayerische Motoren Werke on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Bayerische Motoren Werke or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Bayerische Motoren Werke

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

Bayerische Motoren Werke

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bayerische Motoren Werke are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bayerische Motoren may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petroleo Brasileiro and Bayerische Motoren

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

The idea behind Petroleo Brasileiro Petrobras and Bayerische Motoren Werke 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.