Correlation Between Petroleo Brasileiro and Lennar

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

Diversification Opportunities for Petroleo Brasileiro and Lennar

0.55

Correlation Coefficient

Petroleo Brasileiro  Lennar

Very weak diversification

The 3 months correlation between Petroleo and Lennar is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Lennar go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Lennar

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 14.86 times less return on investment than Lennar. In addition to that, Petroleo Brasileiro is 1.12 times more volatile than Lennar. It trades about 0.0 of its total potential returns per unit of risk. Lennar is currently generating about 0.06 per unit of volatility. If you would invest  261,001  in Lennar on October 7, 2024 and sell it today you would earn a total of  59,999  from holding Lennar or generate 22.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.19%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Lennar

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 latest unfluctuating 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.

Lennar

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lennar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Petroleo Brasileiro and Lennar

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

The idea behind Petroleo Brasileiro Petrobras and Lennar 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.