Correlation Between Petroleo Brasileiro and Crown Holdings

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

Diversification Opportunities for Petroleo Brasileiro and Crown Holdings

-0.05

Correlation Coefficient

Petroleo Brasileiro  Crown Holdings

Good diversification

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

Pair Corralation between Petroleo Brasileiro and Crown Holdings

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Crown Holdings. In addition to that, Petroleo Brasileiro is 1.81 times more volatile than Crown Holdings. It trades about -0.24 of its total potential returns per unit of risk. Crown Holdings is currently generating about -0.41 per unit of volatility. If you would invest  8,664  in Crown Holdings on September 23, 2024 and sell it today you would lose (776.00) from holding Crown Holdings or give up 8.96% of portfolio value over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Crown Holdings

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.

Crown Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crown Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Crown Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Petroleo Brasileiro and Crown Holdings

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

The idea behind Petroleo Brasileiro Petrobras and Crown Holdings 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..