Correlation Between Petroleo Brasileiro and Companhia

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

Diversification Opportunities for Petroleo Brasileiro and Companhia

-0.45

Correlation Coefficient

Petroleo Brasileiro  Companhia

Very good diversification

The 3 months correlation between Petroleo and Companhia is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Companhia de Fiacao in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Fiacao 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Fiacao has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Companhia go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Companhia

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Companhia. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 2.3 times less risky than Companhia. The stock trades about -0.09 of its potential returns per unit of risk. The Companhia de Fiacao is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,550  in Companhia de Fiacao on September 25, 2024 and sell it today you would earn a total of  120.00  from holding Companhia de Fiacao or generate 4.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Companhia de Fiacao

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 latest conflicting performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Companhia de Fiacao

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Fiacao are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petroleo Brasileiro and Companhia

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

The idea behind Petroleo Brasileiro Petrobras and Companhia de Fiacao 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.