Correlation Between Petroleo Brasileiro and US FOODS

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

Diversification Opportunities for Petroleo Brasileiro and US FOODS

-0.22

Correlation Coefficient

Petroleo Brasileiro  US FOODS

Very good diversification

The 3 months correlation between Petroleo and UFH is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and US FOODS HOLDING in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US FOODS 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 US FOODS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US FOODS HOLDING has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and US FOODS go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and US FOODS

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the US FOODS. In addition to that, Petroleo Brasileiro is 1.62 times more volatile than US FOODS HOLDING. It trades about -0.24 of its total potential returns per unit of risk. US FOODS HOLDING is currently generating about -0.09 per unit of volatility. If you would invest  6,650  in US FOODS HOLDING on September 23, 2024 and sell it today you would lose (150.00) from holding US FOODS HOLDING or give up 2.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  US FOODS 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.

US FOODS HOLDING

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US FOODS HOLDING are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and US FOODS

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

The idea behind Petroleo Brasileiro Petrobras and US FOODS 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.