Correlation Between Petroleo Brasileiro and Southeastern Banking

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

Diversification Opportunities for Petroleo Brasileiro and Southeastern Banking

-0.03

Correlation Coefficient

Petroleo Brasileiro  Southeastern Banking

Good diversification

The 3 months correlation between Petroleo and Southeastern is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Southeastern Banking Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southeastern Banking Corp 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 Southeastern Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southeastern Banking Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Southeastern Banking go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Southeastern Banking

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 18.59 times less return on investment than Southeastern Banking. In addition to that, Petroleo Brasileiro is 1.26 times more volatile than Southeastern Banking Corp. It trades about 0.01 of its total potential returns per unit of risk. Southeastern Banking Corp is currently generating about 0.29 per unit of volatility. If you would invest  2,034  in Southeastern Banking Corp on September 13, 2024 and sell it today you would earn a total of  466.00  from holding Southeastern Banking Corp or generate 22.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Southeastern Banking Corp

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Southeastern Banking Corp

Risk-Adjusted Performance

22 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Southeastern Banking Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental drivers, Southeastern Banking exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Southeastern Banking

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

The idea behind Petroleo Brasileiro Petrobras and Southeastern Banking Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.