Correlation Between Petro Rio and Apartment Investment

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

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

Diversification Opportunities for Petro Rio and Apartment Investment

0.19

Correlation Coefficient

Petro Rio  Apartment Investment

Average diversification

The 3 months correlation between Petro and Apartment is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Petro Rio SA and Apartment Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apartment Investment and and Petro Rio 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 Petro Rio SA are associated (or correlated) with Apartment Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apartment Investment and has no effect on the direction of Petro Rio i.e., Petro Rio and Apartment Investment go up and down completely randomly.

Pair Corralation between Petro Rio and Apartment Investment

Assuming the 90 days trading horizon Petro Rio is expected to generate 2.24 times less return on investment than Apartment Investment. But when comparing it to its historical volatility, Petro Rio SA is 2.08 times less risky than Apartment Investment. It trades about 0.02 of its potential returns per unit of risk. Apartment Investment and is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,907  in Apartment Investment and on December 26, 2024 and sell it today you would earn a total of  94.00  from holding Apartment Investment and or generate 1.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Petro Rio SA  vs.  Apartment Investment and

Petro Rio SA

Risk-Adjusted Performance

Very 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.

Apartment Investment and

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Apartment Investment and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Apartment Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Petro Rio and Apartment Investment

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

The idea behind Petro Rio SA and Apartment Investment and 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.