Correlation Between Petroleo Brasileiro and Gujarat Lease

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

Diversification Opportunities for Petroleo Brasileiro and Gujarat Lease

-0.18

Correlation Coefficient

Petroleo Brasileiro  Gujarat Lease

Good diversification

The 3 months correlation between Petroleo and Gujarat is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Gujarat Lease Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gujarat Lease Financing 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 Gujarat Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gujarat Lease Financing has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Gujarat Lease go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Gujarat Lease

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Gujarat Lease. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.63 times less risky than Gujarat Lease. The stock trades about 0.0 of its potential returns per unit of risk. The Gujarat Lease Financing is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  750.00  in Gujarat Lease Financing on September 12, 2024 and sell it today you would earn a total of  117.00  from holding Gujarat Lease Financing or generate 15.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Gujarat Lease Financing

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.

Gujarat Lease Financing

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Gujarat Lease Financing are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Gujarat Lease unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Gujarat Lease

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

The idea behind Petroleo Brasileiro Petrobras and Gujarat Lease Financing 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.