Correlation Between Petroleo Brasileiro and GT Capital

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

Diversification Opportunities for Petroleo Brasileiro and GT Capital

0.34

Correlation Coefficient

Petroleo Brasileiro  GT Capital

Weak diversification

The 3 months correlation between Petroleo and GTPPB is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and GT Capital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GT Capital Holdings 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 GT Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GT Capital Holdings has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and GT Capital go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and GT Capital

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.2 times more return on investment than GT Capital. However, Petroleo Brasileiro is 1.2 times more volatile than GT Capital Holdings. It trades about 0.13 of its potential returns per unit of risk. GT Capital Holdings is currently generating about 0.01 per unit of risk. If you would invest  1,275  in Petroleo Brasileiro Petrobras on December 29, 2024 and sell it today you would earn a total of  164.00  from holding Petroleo Brasileiro Petrobras or generate 12.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	59.02%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  GT Capital Holdings

Petroleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Petroleo Brasileiro reported solid returns over the last few months and may actually be approaching a breakup point.

GT Capital Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days GT Capital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, GT Capital is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Petroleo Brasileiro and GT Capital

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

The idea behind Petroleo Brasileiro Petrobras and GT Capital Holdings 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.