Correlation Between Petroleo Brasileiro and Titan Cement

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

Diversification Opportunities for Petroleo Brasileiro and Titan Cement

0.4

Correlation Coefficient

Petroleo Brasileiro  Titan Cement

Very weak diversification

The 3 months correlation between Petroleo and Titan is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Titan Cement International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Titan Cement Interna 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 Titan Cement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Titan Cement Interna has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Titan Cement go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Titan Cement

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.09 times more return on investment than Titan Cement. However, Petroleo Brasileiro is 1.09 times more volatile than Titan Cement International. It trades about 0.46 of its potential returns per unit of risk. Titan Cement International is currently generating about 0.34 per unit of risk. If you would invest  1,247  in Petroleo Brasileiro Petrobras on October 22, 2024 and sell it today you would earn a total of  125.00  from holding Petroleo Brasileiro Petrobras or generate 10.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Titan Cement International

Petroleo Brasileiro

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Petroleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Titan Cement Interna

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Titan Cement International are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Titan Cement reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Titan Cement

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

The idea behind Petroleo Brasileiro Petrobras and Titan Cement International 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.