Correlation Between Petroleo Brasileiro and Cameco Corp

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

Diversification Opportunities for Petroleo Brasileiro and Cameco Corp

0.28

Correlation Coefficient

Petroleo Brasileiro  Cameco Corp

Modest diversification

The 3 months correlation between Petroleo and Cameco is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Cameco Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cameco 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 Cameco Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cameco Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Cameco Corp go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Cameco Corp

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.48 times more return on investment than Cameco Corp. However, Petroleo Brasileiro Petrobras is 2.06 times less risky than Cameco Corp. It trades about 0.46 of its potential returns per unit of risk. Cameco Corp is currently generating about -0.04 per unit of risk. If you would invest  1,247  in Petroleo Brasileiro Petrobras on October 22, 2024 and sell it today you would earn a total of  125.00  from holding Petroleo Brasileiro Petrobras or generate 10.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Cameco Corp

Petroleo Brasileiro

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Petroleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cameco Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cameco Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Cameco Corp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and Cameco Corp

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

The idea behind Petroleo Brasileiro Petrobras and Cameco 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.