Correlation Between Petroleo Brasileiro and Tax Exempt

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

Diversification Opportunities for Petroleo Brasileiro and Tax Exempt

0.73

Correlation Coefficient

Petroleo Brasileiro  Tax Exempt

Poor diversification

The 3 months correlation between Petroleo and Tax is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Tax Exempt Bond Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tax Exempt Bond 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 Tax Exempt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tax Exempt Bond has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Tax Exempt go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Tax Exempt

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 12.17 times more return on investment than Tax Exempt. However, Petroleo Brasileiro is 12.17 times more volatile than Tax Exempt Bond Fund. It trades about 0.07 of its potential returns per unit of risk. Tax Exempt Bond Fund is currently generating about 0.07 per unit of risk. If you would invest  685.00  in Petroleo Brasileiro Petrobras on September 26, 2024 and sell it today you would earn a total of  608.00  from holding Petroleo Brasileiro Petrobras or generate 88.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Tax Exempt Bond Fund

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 conflicting 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.

Tax Exempt Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tax Exempt Bond Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Tax Exempt 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 Tax Exempt

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

The idea behind Petroleo Brasileiro Petrobras and Tax Exempt Bond Fund 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.