Correlation Between Petroleo Brasileiro and Lleidanetworks Serveis

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

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

Diversification Opportunities for Petroleo Brasileiro and Lleidanetworks Serveis

-0.51

Correlation Coefficient

Petroleo Brasileiro  Lleidanetworks Serveis

Excellent diversification

The 3 months correlation between Petroleo and Lleidanetworks is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro SA and Lleidanetworks Serveis Telemat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lleidanetworks Serveis and Petroleo Brasileiro 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 Petroleo Brasileiro SA are associated (or correlated) with Lleidanetworks Serveis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lleidanetworks Serveis has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Lleidanetworks Serveis go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Lleidanetworks Serveis

Assuming the 90 days trading horizon Petroleo Brasileiro SA is expected to generate 5.04 times more return on investment than Lleidanetworks Serveis. However, Petroleo Brasileiro is 5.04 times more volatile than Lleidanetworks Serveis Telematics. It trades about 0.07 of its potential returns per unit of risk. Lleidanetworks Serveis Telematics is currently generating about -0.04 per unit of risk. If you would invest  613.00  in Petroleo Brasileiro SA on September 13, 2024 and sell it today you would earn a total of  42.00  from holding Petroleo Brasileiro SA or generate 6.85% return on investment over 90 days.

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

Petroleo Brasileiro SA  vs.  Lleidanetworks Serveis Telemat

Petroleo Brasileiro

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Petroleo Brasileiro displayed solid returns over the last few months and may actually be approaching a breakup point.

Lleidanetworks Serveis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lleidanetworks Serveis Telematics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lleidanetworks Serveis is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Petroleo Brasileiro and Lleidanetworks Serveis

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

The idea behind Petroleo Brasileiro SA and Lleidanetworks Serveis Telematics 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.