Correlation Between Petroleo Brasileiro and Centrais Eltricas

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

Diversification Opportunities for Petroleo Brasileiro and Centrais Eltricas

0.04

Correlation Coefficient

Petroleo Brasileiro  Centrais Eltricas

Significant diversification

The 3 months correlation between Petroleo and Centrais is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Centrais Eltricas de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Eltricas 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 Centrais Eltricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Eltricas has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Centrais Eltricas go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Centrais Eltricas

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.11 times more return on investment than Centrais Eltricas. However, Petroleo Brasileiro is 1.11 times more volatile than Centrais Eltricas de. It trades about 0.18 of its potential returns per unit of risk. Centrais Eltricas de is currently generating about 0.01 per unit of risk. If you would invest  1,362  in Petroleo Brasileiro Petrobras on September 12, 2024 and sell it today you would earn a total of  98.00  from holding Petroleo Brasileiro Petrobras or generate 7.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Centrais Eltricas de

Petroleo Brasileiro

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Petroleo Brasileiro is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Centrais Eltricas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centrais Eltricas de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Centrais Eltricas is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Petroleo Brasileiro and Centrais Eltricas

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

The idea behind Petroleo Brasileiro Petrobras and Centrais Eltricas de 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.

Check out your portfolio center.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.