Correlation Between Petrleo Brasileiro and BB Seguridade

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

Diversification Opportunities for Petrleo Brasileiro and BB Seguridade

0.17

Correlation Coefficient

Petrleo Brasileiro  BB Seguridade

Average diversification

The 3 months correlation between Petrleo and BBSE3 is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and BB Seguridade Participacoes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BB Seguridade Partic 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 BB Seguridade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BB Seguridade Partic has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and BB Seguridade go up and down completely randomly.

Pair Corralation between Petrleo Brasileiro and BB Seguridade

Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to generate 1.55 times more return on investment than BB Seguridade. However, Petrleo Brasileiro is 1.55 times more volatile than BB Seguridade Participacoes. It trades about 0.07 of its potential returns per unit of risk. BB Seguridade Participacoes is currently generating about 0.06 per unit of risk. If you would invest  2,942  in Petrleo Brasileiro SA on September 2, 2024 and sell it today you would earn a total of  948.00  from holding Petrleo Brasileiro SA or generate 32.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Petrleo Brasileiro SA  vs.  BB Seguridade Participacoes

Petrleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrleo Brasileiro SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Petrleo Brasileiro is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

BB Seguridade Partic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BB Seguridade Participacoes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Petrleo Brasileiro and BB Seguridade

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

The idea behind Petrleo Brasileiro SA and BB Seguridade Participacoes 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.