Correlation Between Petroleo Brasileiro and Valeo SE

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

Diversification Opportunities for Petroleo Brasileiro and Valeo SE

0.13

Correlation Coefficient

Petroleo Brasileiro  Valeo SE

Average diversification

The 3 months correlation between Petroleo and Valeo is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Valeo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valeo SE 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 Valeo SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valeo SE has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Valeo SE go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Valeo SE

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Valeo SE. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 2.2 times less risky than Valeo SE. The stock trades about -0.08 of its potential returns per unit of risk. The Valeo SE is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  797.00  in Valeo SE on September 22, 2024 and sell it today you would earn a total of  106.00  from holding Valeo SE or generate 13.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Valeo SE

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Valeo SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valeo SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Petroleo Brasileiro and Valeo SE

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

The idea behind Petroleo Brasileiro Petrobras and Valeo SE 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.