Correlation Between Petro Rio and Eneva SA

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

Diversification Opportunities for Petro Rio and Eneva SA

-0.44

Correlation Coefficient

Petro Rio  Eneva SA

Very good diversification

The 3 months correlation between Petro and Eneva is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Petro Rio SA and Eneva SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eneva SA 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 Eneva SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eneva SA has no effect on the direction of Petro Rio i.e., Petro Rio and Eneva SA go up and down completely randomly.

Pair Corralation between Petro Rio and Eneva SA

Assuming the 90 days trading horizon Petro Rio SA is expected to generate 0.63 times more return on investment than Eneva SA. However, Petro Rio SA is 1.59 times less risky than Eneva SA. It trades about 0.02 of its potential returns per unit of risk. Eneva SA is currently generating about -0.01 per unit of risk. If you would invest  4,000  in Petro Rio SA on November 1, 2024 and sell it today you would earn a total of  42.00  from holding Petro Rio SA or generate 1.05% return on investment over 90 days.

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

Petro Rio SA  vs.  Eneva SA

Petro Rio SA

Risk-Adjusted Performance

1 of 100

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.

Eneva SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eneva SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Petro Rio and Eneva SA

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

The idea behind Petro Rio SA and Eneva 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.