Correlation Between Petroleo Brasileiro and NBI Bearings

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

Diversification Opportunities for Petroleo Brasileiro and NBI Bearings

-0.56

Correlation Coefficient

Petroleo Brasileiro  NBI Bearings

Excellent diversification

The 3 months correlation between Petroleo and NBI is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro SA and NBI Bearings Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBI Bearings Europe 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 NBI Bearings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBI Bearings Europe has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and NBI Bearings go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and NBI Bearings

If you would invest  375.00  in Petroleo Brasileiro SA on October 7, 2024 and sell it today you would earn a total of  234.00  from holding Petroleo Brasileiro SA or generate 62.4% 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.  NBI Bearings Europe

Petroleo Brasileiro

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro SA are ranked lower than 10 (%) 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.

NBI Bearings Europe

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NBI Bearings Europe has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Petroleo Brasileiro and NBI Bearings

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

The idea behind Petroleo Brasileiro SA and NBI Bearings Europe 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.