Correlation Between Petroleo Brasileiro and Redcare Pharmacy

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

Diversification Opportunities for Petroleo Brasileiro and Redcare Pharmacy

-0.49

Correlation Coefficient

Petroleo Brasileiro  Redcare Pharmacy

Very good diversification

The 3 months correlation between Petroleo and Redcare is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Redcare Pharmacy NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Redcare Pharmacy 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 Redcare Pharmacy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Redcare Pharmacy has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Redcare Pharmacy go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Redcare Pharmacy

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Redcare Pharmacy. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.53 times less risky than Redcare Pharmacy. The stock trades about -0.21 of its potential returns per unit of risk. The Redcare Pharmacy NV is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  12,030  in Redcare Pharmacy NV on December 5, 2024 and sell it today you would lose (460.00) from holding Redcare Pharmacy NV or give up 3.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Redcare Pharmacy NV

Petroleo Brasileiro

Risk-Adjusted Performance

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.

Redcare Pharmacy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Redcare Pharmacy NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Petroleo Brasileiro and Redcare Pharmacy

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

The idea behind Petroleo Brasileiro Petrobras and Redcare Pharmacy NV 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.