Correlation Between Petroleo Brasileiro and Kopernik Global

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

Diversification Opportunities for Petroleo Brasileiro and Kopernik Global

-0.09

Correlation Coefficient

Petroleo Brasileiro  Kopernik Global

Good diversification

The 3 months correlation between Petroleo and Kopernik is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Kopernik Global All Cap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kopernik Global All 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 Kopernik Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kopernik Global All has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Kopernik Global go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Kopernik Global

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 1.11 times less return on investment than Kopernik Global. In addition to that, Petroleo Brasileiro is 2.23 times more volatile than Kopernik Global All Cap. It trades about 0.13 of its total potential returns per unit of risk. Kopernik Global All Cap is currently generating about 0.31 per unit of volatility. If you would invest  1,102  in Kopernik Global All Cap on December 29, 2024 and sell it today you would earn a total of  171.00  from holding Kopernik Global All Cap or generate 15.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Kopernik Global All Cap

Petroleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Petroleo Brasileiro reported solid returns over the last few months and may actually be approaching a breakup point.

Kopernik Global All

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kopernik Global All Cap are ranked lower than 24 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Kopernik Global showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Kopernik Global

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

The idea behind Petroleo Brasileiro Petrobras and Kopernik Global All Cap 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.