Correlation Between Petroleo Brasileiro and Chemanex PLC

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

Diversification Opportunities for Petroleo Brasileiro and Chemanex PLC

-0.38

Correlation Coefficient

Petroleo Brasileiro  Chemanex PLC

Very good diversification

The 3 months correlation between Petroleo and Chemanex is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Chemanex PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chemanex PLC 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 Chemanex PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chemanex PLC has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Chemanex PLC go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Chemanex PLC

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Chemanex PLC. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 2.68 times less risky than Chemanex PLC. The stock trades about -0.08 of its potential returns per unit of risk. The Chemanex PLC is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  8,000  in Chemanex PLC on October 7, 2024 and sell it today you would earn a total of  10,475  from holding Chemanex PLC or generate 130.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.06%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Chemanex PLC

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 weak 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.

Chemanex PLC

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Chemanex PLC are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chemanex PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Chemanex PLC

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

The idea behind Petroleo Brasileiro Petrobras and Chemanex PLC 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.