Correlation Between Petroleo Brasileiro and Maj Invest

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

Diversification Opportunities for Petroleo Brasileiro and Maj Invest

-0.15

Correlation Coefficient

Petroleo Brasileiro  Maj Invest

Good diversification

The 3 months correlation between Petroleo and Maj is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Maj Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maj Invest 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 Maj Invest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maj Invest has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Maj Invest go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Maj Invest

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 1.6 times less return on investment than Maj Invest. In addition to that, Petroleo Brasileiro is 8.36 times more volatile than Maj Invest . It trades about 0.01 of its total potential returns per unit of risk. Maj Invest is currently generating about 0.17 per unit of volatility. If you would invest  9,951  in Maj Invest on September 13, 2024 and sell it today you would earn a total of  194.00  from holding Maj Invest or generate 1.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Maj Invest

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Maj Invest

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Maj Invest are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat strong forward-looking indicators, Maj Invest is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and Maj Invest

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

The idea behind Petroleo Brasileiro Petrobras and Maj Invest 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.