Correlation Between Elaia Investment and Petroleo Brasileiro

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

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

Diversification Opportunities for Elaia Investment and Petroleo Brasileiro

-0.24

Correlation Coefficient

Elaia Investment  Petroleo Brasileiro

Very good diversification

The 3 months correlation between Elaia and Petroleo is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Elaia Investment Spain and Petroleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Elaia Investment 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 Elaia Investment Spain 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 Elaia Investment i.e., Elaia Investment and Petroleo Brasileiro go up and down completely randomly.

Pair Corralation between Elaia Investment and Petroleo Brasileiro

Assuming the 90 days trading horizon Elaia Investment Spain is expected to under-perform the Petroleo Brasileiro. But the stock apears to be less risky and, when comparing its historical volatility, Elaia Investment Spain is 4.19 times less risky than Petroleo Brasileiro. The stock trades about -0.13 of its potential returns per unit of risk. The Petroleo Brasileiro SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  475.00  in Petroleo Brasileiro SA on September 14, 2024 and sell it today you would earn a total of  140.00  from holding Petroleo Brasileiro SA or generate 29.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Elaia Investment Spain  vs.  Petroleo Brasileiro SA

Elaia Investment Spain

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elaia Investment Spain has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Petroleo Brasileiro

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro SA are ranked lower than 7 (%) 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.

Pair Trading with Elaia Investment and Petroleo Brasileiro

The main advantage of trading using opposite Elaia Investment and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elaia Investment 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 Elaia Investment Spain and Petroleo Brasileiro 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.