Correlation Between Petroleo Brasileiro and Fam Value

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

Diversification Opportunities for Petroleo Brasileiro and Fam Value

0.03

Correlation Coefficient

Petroleo Brasileiro  Fam Value

Significant diversification

The 3 months correlation between Petroleo and Fam is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Fam Value Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fam Value Fund 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 Fam Value. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fam Value Fund has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Fam Value go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Fam Value

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 2.2 times more return on investment than Fam Value. However, Petroleo Brasileiro is 2.2 times more volatile than Fam Value Fund. It trades about 0.07 of its potential returns per unit of risk. Fam Value Fund is currently generating about 0.04 per unit of risk. If you would invest  738.00  in Petroleo Brasileiro Petrobras on October 7, 2024 and sell it today you would earn a total of  564.00  from holding Petroleo Brasileiro Petrobras or generate 76.42% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Fam Value Fund

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 unfluctuating 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.

Fam Value Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fam Value Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fam Value is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and Fam Value

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

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