Correlation Between Petroleo Brasileiro and Industria

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

Diversification Opportunities for Petroleo Brasileiro and Industria

0.18

Correlation Coefficient

Petroleo Brasileiro  Industria

Average diversification

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

Pair Corralation between Petroleo Brasileiro and Industria

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 1.06 times less return on investment than Industria. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.02 times less risky than Industria. It trades about 0.08 of its potential returns per unit of risk. Industria de Diseo is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,573  in Industria de Diseo on September 25, 2024 and sell it today you would earn a total of  2,709  from holding Industria de Diseo or generate 105.29% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Industria de Diseo

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 latest conflicting performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Industria de Diseo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Industria de Diseo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Industria is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Petroleo Brasileiro and Industria

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

The idea behind Petroleo Brasileiro Petrobras and Industria de Diseo 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.