Correlation Between Petroleo Brasileiro and Karsan Otomotiv

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

Diversification Opportunities for Petroleo Brasileiro and Karsan Otomotiv

0.12

Correlation Coefficient

Petroleo Brasileiro  Karsan Otomotiv

Average diversification

The 3 months correlation between Petroleo and Karsan is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Karsan Otomotiv Sanayi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karsan Otomotiv Sanayi 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 Karsan Otomotiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karsan Otomotiv Sanayi has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Karsan Otomotiv go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Karsan Otomotiv

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Karsan Otomotiv. In addition to that, Petroleo Brasileiro is 1.68 times more volatile than Karsan Otomotiv Sanayi. It trades about -0.24 of its total potential returns per unit of risk. Karsan Otomotiv Sanayi is currently generating about -0.12 per unit of volatility. If you would invest  1,291  in Karsan Otomotiv Sanayi on September 23, 2024 and sell it today you would lose (38.00) from holding Karsan Otomotiv Sanayi or give up 2.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Karsan Otomotiv Sanayi

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.

Karsan Otomotiv Sanayi

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Karsan Otomotiv Sanayi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Petroleo Brasileiro and Karsan Otomotiv

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

The idea behind Petroleo Brasileiro Petrobras and Karsan Otomotiv Sanayi 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.