Correlation Between Petroleo Brasileiro and Swiss Life

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

Diversification Opportunities for Petroleo Brasileiro and Swiss Life

0.1

Correlation Coefficient

Petroleo Brasileiro  Swiss Life

Average diversification

The 3 months correlation between Petroleo and Swiss is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Swiss Life Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Life Holding 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 Swiss Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Life Holding has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Swiss Life go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Swiss Life

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 3.3 times less return on investment than Swiss Life. In addition to that, Petroleo Brasileiro is 1.48 times more volatile than Swiss Life Holding. It trades about 0.02 of its total potential returns per unit of risk. Swiss Life Holding is currently generating about 0.08 per unit of volatility. If you would invest  3,060  in Swiss Life Holding on September 15, 2024 and sell it today you would earn a total of  870.00  from holding Swiss Life Holding or generate 28.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Swiss Life Holding

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

Swiss Life Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Swiss Life Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, Swiss Life 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 Swiss Life

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

The idea behind Petroleo Brasileiro Petrobras and Swiss Life Holding 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.