Correlation Between Petrleo Brasileiro and Value Grupo

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

Diversification Opportunities for Petrleo Brasileiro and Value Grupo

-0.46

Correlation Coefficient

Petrleo Brasileiro  Value Grupo

Very good diversification

The 3 months correlation between Petrleo and Value is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Value Grupo Financiero in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Grupo Financiero 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 Value Grupo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Grupo Financiero has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Value Grupo go up and down completely randomly.

Pair Corralation between Petrleo Brasileiro and Value Grupo

Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to under-perform the Value Grupo. But the stock apears to be less risky and, when comparing its historical volatility, Petrleo Brasileiro SA is 1.88 times less risky than Value Grupo. The stock trades about -0.04 of its potential returns per unit of risk. The Value Grupo Financiero is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  8,090  in Value Grupo Financiero on September 17, 2024 and sell it today you would earn a total of  1,214  from holding Value Grupo Financiero or generate 15.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Petrleo Brasileiro SA  vs.  Value Grupo Financiero

Petrleo Brasileiro

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petrleo Brasileiro SA are ranked lower than 1 (%) 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.

Value Grupo Financiero

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Value Grupo Financiero are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Value Grupo is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Petrleo Brasileiro and Value Grupo

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

The idea behind Petrleo Brasileiro SA and Value Grupo Financiero 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.