Correlation Between Petro Rio and SIMPAR SA

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

Diversification Opportunities for Petro Rio and SIMPAR SA

-0.06

Correlation Coefficient

Petro Rio  SIMPAR SA

Good diversification

The 3 months correlation between Petro and SIMPAR is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Petro Rio SA and SIMPAR SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIMPAR 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 SIMPAR SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIMPAR SA has no effect on the direction of Petro Rio i.e., Petro Rio and SIMPAR SA go up and down completely randomly.

Pair Corralation between Petro Rio and SIMPAR SA

Assuming the 90 days trading horizon Petro Rio is expected to generate 25.96 times less return on investment than SIMPAR SA. But when comparing it to its historical volatility, Petro Rio SA is 2.2 times less risky than SIMPAR SA. It trades about 0.01 of its potential returns per unit of risk. SIMPAR SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  351.00  in SIMPAR SA on December 30, 2024 and sell it today you would earn a total of  86.00  from holding SIMPAR SA or generate 24.5% 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.  SIMPAR SA

Petro Rio SA

Risk-Adjusted Performance

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 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.

SIMPAR SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIMPAR SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, SIMPAR SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petro Rio and SIMPAR SA

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

The idea behind Petro Rio SA and SIMPAR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.