Correlation Between Petroleo Brasileiro and Saksoft

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

Diversification Opportunities for Petroleo Brasileiro and Saksoft

0.49

Correlation Coefficient

Petroleo Brasileiro  Saksoft

Very weak diversification

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

Pair Corralation between Petroleo Brasileiro and Saksoft

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Saksoft. In addition to that, Petroleo Brasileiro is 1.33 times more volatile than Saksoft Limited. It trades about -0.12 of its total potential returns per unit of risk. Saksoft Limited is currently generating about 0.16 per unit of volatility. If you would invest  21,111  in Saksoft Limited on September 21, 2024 and sell it today you would earn a total of  1,182  from holding Saksoft Limited or generate 5.6% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Saksoft Limited

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.

Saksoft Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Saksoft Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 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 Saksoft

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

The idea behind Petroleo Brasileiro Petrobras and Saksoft Limited 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.