Correlation Between Petroleo Brasileiro and FAT Brands

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

Diversification Opportunities for Petroleo Brasileiro and FAT Brands

-0.53

Correlation Coefficient

Petroleo Brasileiro  FAT Brands

Excellent diversification

The 3 months correlation between Petroleo and FAT is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and FAT Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FAT Brands 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 FAT Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FAT Brands has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and FAT Brands go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and FAT Brands

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the FAT Brands. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.25 times less risky than FAT Brands. The stock trades about -0.05 of its potential returns per unit of risk. The FAT Brands is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  490.00  in FAT Brands on October 3, 2024 and sell it today you would earn a total of  42.00  from holding FAT Brands or generate 8.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  FAT Brands

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.

FAT Brands

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FAT Brands are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, FAT Brands unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and FAT Brands

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

The idea behind Petroleo Brasileiro Petrobras and FAT Brands 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.