Correlation Between Petroleo Brasileiro and Growth Portfolio

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

Diversification Opportunities for Petroleo Brasileiro and Growth Portfolio

-0.2

Correlation Coefficient

Petroleo Brasileiro  Growth Portfolio

Good diversification

The 3 months correlation between Petroleo and Growth is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Growth Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Growth Portfolio Class 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 Growth Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Growth Portfolio Class has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Growth Portfolio go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Growth Portfolio

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Growth Portfolio. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.08 times less risky than Growth Portfolio. The stock trades about -0.03 of its potential returns per unit of risk. The Growth Portfolio Class is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  4,257  in Growth Portfolio Class on September 14, 2024 and sell it today you would earn a total of  1,909  from holding Growth Portfolio Class or generate 44.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Growth Portfolio Class

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.

Growth Portfolio Class

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Growth Portfolio Class are ranked lower than 28 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Growth Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Growth Portfolio

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

The idea behind Petroleo Brasileiro Petrobras and Growth Portfolio Class 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.