Correlation Between Petroleo Brasileiro and Carbon Revolution

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

Diversification Opportunities for Petroleo Brasileiro and Carbon Revolution

-0.05

Correlation Coefficient

Petroleo Brasileiro  Carbon Revolution

Good diversification

The 3 months correlation between Petroleo and Carbon is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Carbon Revolution Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carbon Revolution Public 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 Carbon Revolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carbon Revolution Public has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Carbon Revolution go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Carbon Revolution

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Carbon Revolution. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 18.21 times less risky than Carbon Revolution. The stock trades about -0.12 of its potential returns per unit of risk. The Carbon Revolution Public is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest  276.00  in Carbon Revolution Public on September 29, 2024 and sell it today you would earn a total of  548.00  from holding Carbon Revolution Public or generate 198.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Carbon Revolution Public

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

Carbon Revolution Public

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carbon Revolution Public are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Carbon Revolution showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Carbon Revolution

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

The idea behind Petroleo Brasileiro Petrobras and Carbon Revolution Public 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.