Correlation Between Petroleo Brasileiro and SIMON

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

Diversification Opportunities for Petroleo Brasileiro and SIMON

-0.55

Correlation Coefficient

Petroleo Brasileiro  SIMON

Excellent diversification

The 3 months correlation between Petroleo and SIMON is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and SIMON PPTY GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMON PPTY GROUP 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 SIMON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMON PPTY GROUP has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and SIMON go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and SIMON

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 15.33 times less return on investment than SIMON. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 26.17 times less risky than SIMON. It trades about 0.08 of its potential returns per unit of risk. SIMON PPTY GROUP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11,049  in SIMON PPTY GROUP on December 4, 2024 and sell it today you would earn a total of  448.00  from holding SIMON PPTY GROUP or generate 4.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.11%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  SIMON PPTY GROUP

Petroleo Brasileiro

Risk-Adjusted Performance

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.

SIMON PPTY GROUP

Risk-Adjusted Performance

Very Weak

Over the last 90 days SIMON PPTY GROUP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SIMON is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and SIMON

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

The idea behind Petroleo Brasileiro Petrobras and SIMON PPTY GROUP 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.