Correlation Between Petro Rio and H1ES34

Can any of the company-specific risk be diversified away by investing in both Petro Rio and H1ES34 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 H1ES34 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 H1ES34, you can compare the effects of market volatilities on Petro Rio and H1ES34 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 H1ES34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petro Rio and H1ES34.

Diversification Opportunities for Petro Rio and H1ES34

-0.16

Correlation Coefficient

Petro Rio  H1ES34

Good diversification

The 3 months correlation between Petro and H1ES34 is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Petro Rio SA and H1ES34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H1ES34 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 H1ES34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H1ES34 has no effect on the direction of Petro Rio i.e., Petro Rio and H1ES34 go up and down completely randomly.

Pair Corralation between Petro Rio and H1ES34

Assuming the 90 days trading horizon Petro Rio SA is expected to under-perform the H1ES34. In addition to that, Petro Rio is 54.47 times more volatile than H1ES34. It trades about -0.07 of its total potential returns per unit of risk. H1ES34 is currently generating about 0.13 per unit of volatility. If you would invest  37,818  in H1ES34 on September 23, 2024 and sell it today you would earn a total of  106.00  from holding H1ES34 or generate 0.28% return on investment over 90 days.

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

Petro Rio SA  vs.  H1ES34

Petro Rio SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petro Rio SA 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.

H1ES34

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in H1ES34 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, H1ES34 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petro Rio and H1ES34

The main advantage of trading using opposite Petro Rio and H1ES34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petro Rio position performs unexpectedly, H1ES34 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 H1ES34 will offset losses from the drop in H1ES34's long position.

The idea behind Petro Rio SA and H1ES34 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.