Correlation Between PDG Realty and Petro Rio

Can any of the company-specific risk be diversified away by investing in both PDG Realty and Petro Rio 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 PDG Realty and Petro Rio into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for PDG Realty and Petro Rio

-0.12

Correlation Coefficient

PDG Realty  Petro Rio

Good diversification

The 3 months correlation between PDG and Petro is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding PDG Realty SA and Petro Rio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Rio SA and PDG Realty 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 PDG Realty SA are associated (or correlated) with Petro Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Rio SA has no effect on the direction of PDG Realty i.e., PDG Realty and Petro Rio go up and down completely randomly.

Pair Corralation between PDG Realty and Petro Rio

Assuming the 90 days trading horizon PDG Realty SA is expected to generate 68.39 times more return on investment than Petro Rio. However, PDG Realty is 68.39 times more volatile than Petro Rio SA. It trades about 0.13 of its potential returns per unit of risk. Petro Rio SA is currently generating about 0.02 per unit of risk. If you would invest  125.00  in PDG Realty SA on December 27, 2024 and sell it today you would lose (47.00) from holding PDG Realty SA or give up 37.6% of portfolio value over 90 days.

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

PDG Realty SA  vs.  Petro Rio SA

PDG Realty SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PDG Realty SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, PDG Realty unveiled solid returns over the last few months and may actually be approaching a breakup point.

Petro Rio SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petro Rio SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Petro Rio is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PDG Realty and Petro Rio

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

The idea behind PDG Realty SA and Petro Rio SA 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.