Correlation Between Petrleo Brasileiro and KeyCorp

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

Diversification Opportunities for Petrleo Brasileiro and KeyCorp

-0.17

Correlation Coefficient

Petrleo Brasileiro  KeyCorp

Good diversification

The 3 months correlation between Petrleo and KeyCorp is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and KeyCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KeyCorp 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 KeyCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KeyCorp has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and KeyCorp go up and down completely randomly.

Pair Corralation between Petrleo Brasileiro and KeyCorp

Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to generate 1.49 times more return on investment than KeyCorp. However, Petrleo Brasileiro is 1.49 times more volatile than KeyCorp. It trades about 0.08 of its potential returns per unit of risk. KeyCorp is currently generating about -0.31 per unit of risk. If you would invest  4,108  in Petrleo Brasileiro SA on November 27, 2024 and sell it today you would earn a total of  90.00  from holding Petrleo Brasileiro SA or generate 2.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Petrleo Brasileiro SA  vs.  KeyCorp

Petrleo Brasileiro

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petrleo Brasileiro SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Petrleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in March 2025.

KeyCorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days KeyCorp 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 somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Petrleo Brasileiro and KeyCorp

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

The idea behind Petrleo Brasileiro SA and KeyCorp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.