Correlation Between Petroleo Brasileiro and Simplify Exchange

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

Diversification Opportunities for Petroleo Brasileiro and Simplify Exchange

-0.38

Correlation Coefficient

Petroleo Brasileiro  Simplify Exchange

Very good diversification

The 3 months correlation between Petroleo and Simplify is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Simplify Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Exchange Traded 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 Simplify Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Exchange Traded has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Simplify Exchange go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Simplify Exchange

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 1.36 times less return on investment than Simplify Exchange. In addition to that, Petroleo Brasileiro is 9.08 times more volatile than Simplify Exchange Traded. It trades about 0.01 of its total potential returns per unit of risk. Simplify Exchange Traded is currently generating about 0.08 per unit of volatility. If you would invest  2,258  in Simplify Exchange Traded on September 14, 2024 and sell it today you would earn a total of  108.00  from holding Simplify Exchange Traded or generate 4.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Simplify Exchange Traded

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.

Simplify Exchange Traded

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Exchange Traded are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong technical and fundamental indicators, Simplify Exchange is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Petroleo Brasileiro and Simplify Exchange

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

The idea behind Petroleo Brasileiro Petrobras and Simplify Exchange Traded 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.