Correlation Between Petroleo Brasileiro and Power Mech

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

Diversification Opportunities for Petroleo Brasileiro and Power Mech

0.44

Correlation Coefficient

Petroleo Brasileiro  Power Mech

Very weak diversification

The 3 months correlation between Petroleo and Power is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Power Mech Projects in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Mech Projects 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 Power Mech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Mech Projects has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Power Mech go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Power Mech

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.68 times more return on investment than Power Mech. However, Petroleo Brasileiro Petrobras is 1.46 times less risky than Power Mech. It trades about -0.04 of its potential returns per unit of risk. Power Mech Projects is currently generating about -0.13 per unit of risk. If you would invest  1,344  in Petroleo Brasileiro Petrobras on September 21, 2024 and sell it today you would lose (49.00) from holding Petroleo Brasileiro Petrobras or give up 3.65% 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.  Power Mech Projects

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.

Power Mech Projects

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Mech Projects has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Petroleo Brasileiro and Power Mech

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

The idea behind Petroleo Brasileiro Petrobras and Power Mech Projects 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.