Correlation Between Petroleo Brasileiro and Direxion Daily

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

Diversification Opportunities for Petroleo Brasileiro and Direxion Daily

-0.34

Correlation Coefficient

Petroleo Brasileiro  Direxion Daily

Very good diversification

The 3 months correlation between Petroleo and Direxion is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Direxion Daily Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Technology 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 Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Technology has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Direxion Daily go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Direxion Daily

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 3.72 times less return on investment than Direxion Daily. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 2.16 times less risky than Direxion Daily. It trades about 0.03 of its potential returns per unit of risk. Direxion Daily Technology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,136  in Direxion Daily Technology on December 2, 2024 and sell it today you would earn a total of  2,697  from holding Direxion Daily Technology or generate 52.51% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Direxion Daily Technology

Petroleo Brasileiro

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Direxion Daily Technology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Direxion Daily Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Etf's fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the ETF venture institutional investors.

Pair Trading with Petroleo Brasileiro and Direxion Daily

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

The idea behind Petroleo Brasileiro Petrobras and Direxion Daily Technology 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.