Correlation Between Petroleo Brasileiro and Zhonghong Pulin

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

Diversification Opportunities for Petroleo Brasileiro and Zhonghong Pulin

-0.29

Correlation Coefficient

Petroleo Brasileiro  Zhonghong Pulin

Very good diversification

The 3 months correlation between Petroleo and Zhonghong is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Zhonghong Pulin Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zhonghong Pulin Medical 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 Zhonghong Pulin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zhonghong Pulin Medical has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Zhonghong Pulin go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Zhonghong Pulin

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Zhonghong Pulin. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 3.19 times less risky than Zhonghong Pulin. The stock trades about -0.03 of its potential returns per unit of risk. The Zhonghong Pulin Medical is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  974.00  in Zhonghong Pulin Medical on September 19, 2024 and sell it today you would earn a total of  412.00  from holding Zhonghong Pulin Medical or generate 42.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Zhonghong Pulin Medical

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.

Zhonghong Pulin Medical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zhonghong Pulin Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zhonghong Pulin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Zhonghong Pulin

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

The idea behind Petroleo Brasileiro Petrobras and Zhonghong Pulin Medical 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.