Correlation Between Petroleo Brasileiro and Ceylon Guardian

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

Diversification Opportunities for Petroleo Brasileiro and Ceylon Guardian

0.58

Correlation Coefficient

Petroleo Brasileiro  Ceylon Guardian

Very weak diversification

The 3 months correlation between Petroleo and Ceylon is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Ceylon Guardian Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ceylon Guardian Inve 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 Ceylon Guardian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ceylon Guardian Inve has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Ceylon Guardian go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Ceylon Guardian

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.54 times more return on investment than Ceylon Guardian. However, Petroleo Brasileiro Petrobras is 1.86 times less risky than Ceylon Guardian. It trades about -0.22 of its potential returns per unit of risk. Ceylon Guardian Investment is currently generating about -0.16 per unit of risk. If you would invest  1,422  in Petroleo Brasileiro Petrobras on December 4, 2024 and sell it today you would lose (137.00) from holding Petroleo Brasileiro Petrobras or give up 9.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Ceylon Guardian Investment

Petroleo Brasileiro

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Ceylon Guardian Inve

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ceylon Guardian Investment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ceylon Guardian sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Ceylon Guardian

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

The idea behind Petroleo Brasileiro Petrobras and Ceylon Guardian Investment 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..