Correlation Between Petroleo Brasileiro and Regional Container

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

Diversification Opportunities for Petroleo Brasileiro and Regional Container

0.01

Correlation Coefficient

Petroleo Brasileiro  Regional Container

Significant diversification

The 3 months correlation between Petroleo and Regional is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Regional Container Lines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Container Lines 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 Regional Container. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Container Lines has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Regional Container go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Regional Container

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 22.8 times less return on investment than Regional Container. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 31.4 times less risky than Regional Container. It trades about 0.08 of its potential returns per unit of risk. Regional Container Lines is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,075  in Regional Container Lines on September 24, 2024 and sell it today you would lose (300.00) from holding Regional Container Lines or give up 9.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.98%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Regional Container Lines

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.

Regional Container Lines

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Container Lines are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, Regional Container sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Regional Container

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

The idea behind Petroleo Brasileiro Petrobras and Regional Container Lines 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.