Correlation Between Petroleo Brasileiro and Fujian Green

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

Diversification Opportunities for Petroleo Brasileiro and Fujian Green

-0.49

Correlation Coefficient

Petroleo Brasileiro  Fujian Green

Very good diversification

The 3 months correlation between Petroleo and Fujian is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Fujian Green Pine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fujian Green Pine 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 Fujian Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fujian Green Pine has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Fujian Green go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Fujian Green

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.7 times more return on investment than Fujian Green. However, Petroleo Brasileiro Petrobras is 1.43 times less risky than Fujian Green. It trades about 0.07 of its potential returns per unit of risk. Fujian Green Pine is currently generating about -0.01 per unit of risk. If you would invest  721.00  in Petroleo Brasileiro Petrobras on September 29, 2024 and sell it today you would earn a total of  542.00  from holding Petroleo Brasileiro Petrobras or generate 75.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.27%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Fujian Green Pine

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.

Fujian Green Pine

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fujian Green Pine are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fujian Green sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Fujian Green

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

The idea behind Petroleo Brasileiro Petrobras and Fujian Green Pine 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.