Correlation Between Petroleo Brasileiro and Cobalt Power

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

Diversification Opportunities for Petroleo Brasileiro and Cobalt Power

0.33

Correlation Coefficient

Petroleo Brasileiro  Cobalt Power

Weak diversification

The 3 months correlation between Petroleo and Cobalt is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Cobalt Power Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cobalt Power Group 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 Cobalt Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cobalt Power Group has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Cobalt Power go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Cobalt Power

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 13.06 times less return on investment than Cobalt Power. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 11.79 times less risky than Cobalt Power. It trades about 0.07 of its potential returns per unit of risk. Cobalt Power Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Cobalt Power Group on October 3, 2024 and sell it today you would lose (12.50) from holding Cobalt Power Group or give up 83.33% of portfolio value over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Cobalt Power Group

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 unsteady 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.

Cobalt Power Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cobalt Power Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Petroleo Brasileiro and Cobalt Power

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

The idea behind Petroleo Brasileiro Petrobras and Cobalt Power Group 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.