Correlation Between Stamper Oil and Petroleo Brasileiro

Can any of the company-specific risk be diversified away by investing in both Stamper Oil and Petroleo Brasileiro 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 Stamper Oil and Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Stamper Oil Gas and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Stamper Oil and Petroleo Brasileiro 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 Stamper Oil with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stamper Oil and Petroleo Brasileiro.

Diversification Opportunities for Stamper Oil and Petroleo Brasileiro

0.28

Correlation Coefficient

Stamper Oil  Petroleo Brasileiro

Modest diversification

The 3 months correlation between Stamper and Petroleo is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Stamper Oil Gas and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Stamper Oil 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 Stamper Oil Gas are associated (or correlated) with Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of Stamper Oil i.e., Stamper Oil and Petroleo Brasileiro go up and down completely randomly.

Pair Corralation between Stamper Oil and Petroleo Brasileiro

Assuming the 90 days horizon Stamper Oil Gas is expected to generate 29.99 times more return on investment than Petroleo Brasileiro. However, Stamper Oil is 29.99 times more volatile than Petroleo Brasileiro Petrobras. It trades about 0.07 of its potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about 0.07 per unit of risk. If you would invest  23.00  in Stamper Oil Gas on October 4, 2024 and sell it today you would lose (22.00) from holding Stamper Oil Gas or give up 95.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Stamper Oil Gas  vs.  Petroleo Brasileiro Petrobras

Stamper Oil Gas

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stamper Oil Gas are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Stamper Oil reported solid returns over the last few months and may actually be approaching a breakup point.

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petroleo Brasileiro Petrobras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Petroleo Brasileiro is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Stamper Oil and Petroleo Brasileiro

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

The idea behind Stamper Oil Gas and Petroleo Brasileiro Petrobras 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.