Correlation Between Petroleo Brasileiro and Sleep Cycle

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

Diversification Opportunities for Petroleo Brasileiro and Sleep Cycle

0.41

Correlation Coefficient

Petroleo Brasileiro  Sleep Cycle

Very weak diversification

The 3 months correlation between Petroleo and Sleep is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Sleep Cycle AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleep Cycle AB 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 Sleep Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleep Cycle AB has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Sleep Cycle go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Sleep Cycle

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.17 times more return on investment than Sleep Cycle. However, Petroleo Brasileiro is 1.17 times more volatile than Sleep Cycle AB. It trades about -0.1 of its potential returns per unit of risk. Sleep Cycle AB is currently generating about -0.18 per unit of risk. If you would invest  1,375  in Petroleo Brasileiro Petrobras on September 21, 2024 and sell it today you would lose (71.00) from holding Petroleo Brasileiro Petrobras or give up 5.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Sleep Cycle AB

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 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.

Sleep Cycle AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sleep Cycle AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Petroleo Brasileiro and Sleep Cycle

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

The idea behind Petroleo Brasileiro Petrobras and Sleep Cycle AB 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.