Correlation Between Petroleo Brasileiro and Procyon

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

Diversification Opportunities for Petroleo Brasileiro and Procyon

0.4

Correlation Coefficient

Petroleo Brasileiro  Procyon

Very weak diversification

The 3 months correlation between Petroleo and Procyon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Procyon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procyon 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 Procyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procyon has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Procyon go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Procyon

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Procyon. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 4.23 times less risky than Procyon. The stock trades about -0.08 of its potential returns per unit of risk. The Procyon is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Procyon on October 1, 2024 and sell it today you would lose (3.00) from holding Procyon or give up 11.11% of portfolio value over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Procyon

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 conflicting 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.

Procyon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procyon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Procyon is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and Procyon

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

The idea behind Petroleo Brasileiro Petrobras and Procyon 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.