Correlation Between Petroleo Brasileiro and Yerbae Brands

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

Diversification Opportunities for Petroleo Brasileiro and Yerbae Brands

0.33

Correlation Coefficient

Petroleo Brasileiro  Yerbae Brands

Weak diversification

The 3 months correlation between Petroleo and Yerbae is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Yerbae Brands Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Yerbae Brands Corp 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 Yerbae Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Yerbae Brands Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Yerbae Brands go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Yerbae Brands

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Yerbae Brands. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 6.26 times less risky than Yerbae Brands. The stock trades about -0.08 of its potential returns per unit of risk. The Yerbae Brands Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  14.00  in Yerbae Brands Corp on September 22, 2024 and sell it today you would lose (2.00) from holding Yerbae Brands Corp or give up 14.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Yerbae Brands Corp

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.

Yerbae Brands Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Yerbae Brands Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Yerbae Brands may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petroleo Brasileiro and Yerbae Brands

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

The idea behind Petroleo Brasileiro Petrobras and Yerbae Brands Corp 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.