Correlation Between Petroleo Brasileiro and Putnam Focused

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

Diversification Opportunities for Petroleo Brasileiro and Putnam Focused

-0.32

Correlation Coefficient

Petroleo Brasileiro  Putnam Focused

Very good diversification

The 3 months correlation between Petroleo and Putnam is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Putnam Focused Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Putnam Focused Large 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 Putnam Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Putnam Focused Large has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Putnam Focused go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Putnam Focused

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Putnam Focused. In addition to that, Petroleo Brasileiro is 1.76 times more volatile than Putnam Focused Large. It trades about -0.24 of its total potential returns per unit of risk. Putnam Focused Large is currently generating about 0.18 per unit of volatility. If you would invest  3,776  in Putnam Focused Large on September 23, 2024 and sell it today you would earn a total of  144.00  from holding Putnam Focused Large or generate 3.81% 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.  Putnam Focused Large

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.

Putnam Focused Large

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Putnam Focused Large are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Putnam Focused may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petroleo Brasileiro and Putnam Focused

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

The idea behind Petroleo Brasileiro Petrobras and Putnam Focused Large 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.