Correlation Between Petroleo Brasileiro and Diamond Hill

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

Diversification Opportunities for Petroleo Brasileiro and Diamond Hill

0.11

Correlation Coefficient

Petroleo Brasileiro  Diamond Hill

Average diversification

The 3 months correlation between Petroleo and Diamond is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Diamond Hill Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamond Hill Small 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 Diamond Hill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamond Hill Small has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Diamond Hill go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Diamond Hill

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Diamond Hill. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.17 times less risky than Diamond Hill. The stock trades about -0.08 of its potential returns per unit of risk. The Diamond Hill Small is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,610  in Diamond Hill Small on October 1, 2024 and sell it today you would lose (203.00) from holding Diamond Hill Small or give up 7.78% of portfolio value over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Diamond Hill Small

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 unsteady 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.

Diamond Hill Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diamond Hill Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Petroleo Brasileiro and Diamond Hill

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

The idea behind Petroleo Brasileiro Petrobras and Diamond Hill Small 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..