Correlation Between Petroleo Brasileiro and Source KBW

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

Diversification Opportunities for Petroleo Brasileiro and Source KBW

-0.27

Correlation Coefficient

Petroleo Brasileiro  Source KBW

Very good diversification

The 3 months correlation between Petroleo and Source is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Source KBW NASDAQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Source KBW NASDAQ 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 Source KBW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Source KBW NASDAQ has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Source KBW go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Source KBW

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Source KBW. In addition to that, Petroleo Brasileiro is 2.07 times more volatile than Source KBW NASDAQ. It trades about -0.18 of its total potential returns per unit of risk. Source KBW NASDAQ is currently generating about -0.32 per unit of volatility. If you would invest  5,973  in Source KBW NASDAQ on September 27, 2024 and sell it today you would lose (345.00) from holding Source KBW NASDAQ or give up 5.78% of portfolio value over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Source KBW NASDAQ

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.

Source KBW NASDAQ

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Source KBW NASDAQ are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile forward-looking signals, Source KBW exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Source KBW

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

The idea behind Petroleo Brasileiro Petrobras and Source KBW NASDAQ 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.