Correlation Between Petroleo Brasileiro and China Great

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

By analyzing existing cross correlation between Petroleo Brasileiro Petrobras and China Great Wall, you can compare the effects of market volatilities on Petroleo Brasileiro and China Great 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 China Great. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and China Great.

Diversification Opportunities for Petroleo Brasileiro and China Great

-0.31

Correlation Coefficient

Petroleo Brasileiro  China Great

Very good diversification

The 3 months correlation between Petroleo and China is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and China Great Wall in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Great Wall 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 Petrobras are associated (or correlated) with China Great. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Great Wall has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and China Great go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and China Great

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the China Great. In addition to that, Petroleo Brasileiro is 1.34 times more volatile than China Great Wall. It trades about -0.19 of its total potential returns per unit of risk. China Great Wall is currently generating about 0.11 per unit of volatility. If you would invest  819.00  in China Great Wall on September 27, 2024 and sell it today you would earn a total of  26.00  from holding China Great Wall or generate 3.17% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  China Great Wall

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.

China Great Wall

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Great Wall are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, China Great is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and China Great

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

The idea behind Petroleo Brasileiro Petrobras and China Great Wall 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.