Correlation Between Petroleo Brasileiro and Dixons Carphone

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

Diversification Opportunities for Petroleo Brasileiro and Dixons Carphone

0.09

Correlation Coefficient

Petroleo Brasileiro  Dixons Carphone

Significant diversification

The 3 months correlation between Petroleo and Dixons is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Dixons Carphone plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dixons Carphone 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 Dixons Carphone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dixons Carphone plc has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Dixons Carphone go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Dixons Carphone

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Dixons Carphone. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.64 times less risky than Dixons Carphone. The stock trades about -0.24 of its potential returns per unit of risk. The Dixons Carphone plc is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Dixons Carphone plc on September 23, 2024 and sell it today you would earn a total of  19.00  from holding Dixons Carphone plc or generate 19.19% 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.  Dixons Carphone 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 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.

Dixons Carphone plc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dixons Carphone plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dixons Carphone may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petroleo Brasileiro and Dixons Carphone

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

The idea behind Petroleo Brasileiro Petrobras and Dixons Carphone 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 Transaction History module to view history of all your transactions and understand their impact on performance.