Correlation Between Petroleo Brasileiro and Tekna Holding

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

Diversification Opportunities for Petroleo Brasileiro and Tekna Holding

0.46

Correlation Coefficient

Petroleo Brasileiro  Tekna Holding

Very weak diversification

The 3 months correlation between Petroleo and Tekna is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Tekna Holding AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tekna Holding AS 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 Tekna Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tekna Holding AS has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Tekna Holding go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Tekna Holding

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.31 times more return on investment than Tekna Holding. However, Petroleo Brasileiro Petrobras is 3.27 times less risky than Tekna Holding. It trades about -0.03 of its potential returns per unit of risk. Tekna Holding AS is currently generating about -0.05 per unit of risk. If you would invest  1,423  in Petroleo Brasileiro Petrobras on September 15, 2024 and sell it today you would lose (50.00) from holding Petroleo Brasileiro Petrobras or give up 3.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.97%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Tekna Holding AS

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.

Tekna Holding AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tekna Holding AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Petroleo Brasileiro and Tekna Holding

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

The idea behind Petroleo Brasileiro Petrobras and Tekna Holding AS 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.