Correlation Between Petrleo Brasileiro and FIBRA Storage

Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and FIBRA Storage 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 Petrleo Brasileiro and FIBRA Storage into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Petrleo Brasileiro SA and FIBRA Storage, you can compare the effects of market volatilities on Petrleo Brasileiro and FIBRA Storage 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 Petrleo Brasileiro with a short position of FIBRA Storage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and FIBRA Storage.

Diversification Opportunities for Petrleo Brasileiro and FIBRA Storage

-0.01

Correlation Coefficient

Petrleo Brasileiro  FIBRA Storage

Good diversification

The 3 months correlation between Petrleo and FIBRA is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and FIBRA Storage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FIBRA Storage and Petrleo 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 Petrleo Brasileiro SA are associated (or correlated) with FIBRA Storage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FIBRA Storage has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and FIBRA Storage go up and down completely randomly.

Pair Corralation between Petrleo Brasileiro and FIBRA Storage

Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to under-perform the FIBRA Storage. In addition to that, Petrleo Brasileiro is 3.94 times more volatile than FIBRA Storage. It trades about -0.08 of its total potential returns per unit of risk. FIBRA Storage is currently generating about 0.45 per unit of volatility. If you would invest  1,720  in FIBRA Storage on September 18, 2024 and sell it today you would earn a total of  70.00  from holding FIBRA Storage or generate 4.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Petrleo Brasileiro SA  vs.  FIBRA Storage

Petrleo Brasileiro

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petrleo Brasileiro SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Petrleo Brasileiro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

FIBRA Storage

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FIBRA Storage are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, FIBRA Storage exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petrleo Brasileiro and FIBRA Storage

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

The idea behind Petrleo Brasileiro SA and FIBRA Storage 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.