Correlation Between Petroleo Brasileiro and Inepar SA

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

Diversification Opportunities for Petroleo Brasileiro and Inepar SA

0.5

Correlation Coefficient

Petroleo Brasileiro  Inepar SA

Very weak diversification

The 3 months correlation between Petroleo and Inepar is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Inepar SA Indstria in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inepar SA Indstria 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 Inepar SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inepar SA Indstria has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Inepar SA go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Inepar SA

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 10.02 times less return on investment than Inepar SA. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.39 times less risky than Inepar SA. It trades about 0.01 of its potential returns per unit of risk. Inepar SA Indstria is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  138.00  in Inepar SA Indstria on September 16, 2024 and sell it today you would earn a total of  7.00  from holding Inepar SA Indstria or generate 5.07% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Inepar SA Indstria

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.

Inepar SA Indstria

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inepar SA Indstria has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Petroleo Brasileiro and Inepar SA

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

The idea behind Petroleo Brasileiro Petrobras and Inepar SA Indstria 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.