Correlation Between Petroleo Brasileiro and CONSTELLATION

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

Diversification Opportunities for Petroleo Brasileiro and CONSTELLATION

0.19

Correlation Coefficient

Petroleo Brasileiro  CONSTELLATION

Average diversification

The 3 months correlation between Petroleo and CONSTELLATION is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and CONSTELLATION BRANDS INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSTELLATION BRANDS INC 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 CONSTELLATION. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSTELLATION BRANDS INC has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and CONSTELLATION go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and CONSTELLATION

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 45.92 times less return on investment than CONSTELLATION. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 41.27 times less risky than CONSTELLATION. It trades about 0.07 of its potential returns per unit of risk. CONSTELLATION BRANDS INC is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  8,914  in CONSTELLATION BRANDS INC on October 3, 2024 and sell it today you would lose (399.00) from holding CONSTELLATION BRANDS INC or give up 4.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	56.97%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  CONSTELLATION BRANDS INC

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 latest unsteady performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

CONSTELLATION BRANDS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CONSTELLATION BRANDS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSTELLATION BRANDS INC investors.

Pair Trading with Petroleo Brasileiro and CONSTELLATION

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

The idea behind Petroleo Brasileiro Petrobras and CONSTELLATION BRANDS INC 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.