Correlation Between Petroleo Brasileiro and Deka Deutsche

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

Diversification Opportunities for Petroleo Brasileiro and Deka Deutsche

0.4

Correlation Coefficient

Petroleo Brasileiro  Deka Deutsche

Very weak diversification

The 3 months correlation between Petroleo and Deka is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Deka Deutsche Brse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deka Deutsche Brse 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 Deka Deutsche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deka Deutsche Brse has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Deka Deutsche go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Deka Deutsche

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Deka Deutsche. In addition to that, Petroleo Brasileiro is 10.28 times more volatile than Deka Deutsche Brse. It trades about -0.07 of its total potential returns per unit of risk. Deka Deutsche Brse is currently generating about -0.58 per unit of volatility. If you would invest  10,891  in Deka Deutsche Brse on October 3, 2024 and sell it today you would lose (212.00) from holding Deka Deutsche Brse or give up 1.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.48%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Deka Deutsche Brse

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.

Deka Deutsche Brse

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Deka Deutsche Brse has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Deka Deutsche is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Petroleo Brasileiro and Deka Deutsche

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

The idea behind Petroleo Brasileiro Petrobras and Deka Deutsche Brse 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.