Correlation Between Petroleo Brasileiro and IEMR Resources

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

Diversification Opportunities for Petroleo Brasileiro and IEMR Resources

0.0

Correlation Coefficient

Petroleo Brasileiro  IEMR Resources

Pay attention - limited upside

The 3 months correlation between Petroleo and IEMR is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and IEMR Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IEMR Resources 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 IEMR Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IEMR Resources has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and IEMR Resources go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and IEMR Resources

If you would invest (100.00) in IEMR Resources on September 25, 2024 and sell it today you would earn a total of  100.00  from holding IEMR Resources or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  IEMR Resources

Petroleo Brasileiro

Risk-Adjusted Performance

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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.

IEMR Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IEMR Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, IEMR Resources 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 IEMR Resources

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

The idea behind Petroleo Brasileiro Petrobras and IEMR Resources 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.