Correlation Between Petroleo Brasileiro and First State

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

Diversification Opportunities for Petroleo Brasileiro and First State

-0.19

Correlation Coefficient

Petroleo Brasileiro  First State

Good diversification

The 3 months correlation between Petroleo and First is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and First State Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First State Financial 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 First State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First State Financial has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and First State go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and First State

If you would invest  1,372  in Petroleo Brasileiro Petrobras on September 13, 2024 and sell it today you would earn a total of  88.00  from holding Petroleo Brasileiro Petrobras or generate 6.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  First State Financial

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

First State Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First State Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First State is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Petroleo Brasileiro and First State

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

The idea behind Petroleo Brasileiro Petrobras and First State Financial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.