Correlation Between Petroleo Brasileiro and Compania Introductora

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

Diversification Opportunities for Petroleo Brasileiro and Compania Introductora

0.08

Correlation Coefficient

Petroleo Brasileiro  Compania Introductora

Significant diversification

The 3 months correlation between Petroleo and Compania is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Compania Introductora de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compania Introductora 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 Compania Introductora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compania Introductora has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Compania Introductora go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Compania Introductora

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.8 times more return on investment than Compania Introductora. However, Petroleo Brasileiro Petrobras is 1.26 times less risky than Compania Introductora. It trades about 0.43 of its potential returns per unit of risk. Compania Introductora de is currently generating about 0.05 per unit of risk. If you would invest  1,249  in Petroleo Brasileiro Petrobras on October 20, 2024 and sell it today you would earn a total of  123.00  from holding Petroleo Brasileiro Petrobras or generate 9.85% 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.  Compania Introductora de

Petroleo Brasileiro

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Petroleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Compania Introductora

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compania Introductora de are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compania Introductora sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Compania Introductora

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

The idea behind Petroleo Brasileiro Petrobras and Compania Introductora de 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.