Correlation Between Petroleo Brasileiro and Harn Engineering

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

Diversification Opportunities for Petroleo Brasileiro and Harn Engineering

-0.05

Correlation Coefficient

Petroleo Brasileiro  Harn Engineering

Good diversification

The 3 months correlation between Petroleo and Harn is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Harn Engineering Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harn Engineering Sol 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 Harn Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harn Engineering Sol has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Harn Engineering go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Harn Engineering

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Harn Engineering. In addition to that, Petroleo Brasileiro is 1.74 times more volatile than Harn Engineering Solutions. It trades about -0.05 of its total potential returns per unit of risk. Harn Engineering Solutions is currently generating about 0.02 per unit of volatility. If you would invest  210.00  in Harn Engineering Solutions on September 18, 2024 and sell it today you would earn a total of  2.00  from holding Harn Engineering Solutions or generate 0.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Harn Engineering Solutions

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.

Harn Engineering Sol

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Harn Engineering Solutions are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward-looking signals, Harn Engineering is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Petroleo Brasileiro and Harn Engineering

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

The idea behind Petroleo Brasileiro Petrobras and Harn Engineering Solutions 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.