Correlation Between Petroleo Brasileiro and Pace High

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

Diversification Opportunities for Petroleo Brasileiro and Pace High

0.32

Correlation Coefficient

Petroleo Brasileiro  Pace High

Weak diversification

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

Pair Corralation between Petroleo Brasileiro and Pace High

If you would invest  1,261  in Petroleo Brasileiro Petrobras on December 27, 2024 and sell it today you would earn a total of  188.00  from holding Petroleo Brasileiro Petrobras or generate 14.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	26.23%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Pace High Yield

Petroleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Petroleo Brasileiro reported solid returns over the last few months and may actually be approaching a breakup point.

Pace High Yield

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pace High Yield has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Pace High is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and Pace High

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

The idea behind Petroleo Brasileiro Petrobras and Pace High Yield 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.