Correlation Between Petroleo Brasileiro and SNC Lavalin

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

Diversification Opportunities for Petroleo Brasileiro and SNC Lavalin

-0.48

Correlation Coefficient

Petroleo Brasileiro  SNC Lavalin

Very good diversification

The 3 months correlation between Petroleo and SNC is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and SNC Lavalin Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNC Lavalin Group 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 SNC Lavalin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNC Lavalin Group has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and SNC Lavalin go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and SNC Lavalin

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 11.8 times less return on investment than SNC Lavalin. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.1 times less risky than SNC Lavalin. It trades about 0.01 of its potential returns per unit of risk. SNC Lavalin Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,969  in SNC Lavalin Group on October 1, 2024 and sell it today you would earn a total of  3,555  from holding SNC Lavalin Group or generate 89.57% 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 Petrobras  vs.  SNC Lavalin Group

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 latest unsteady performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

SNC Lavalin Group

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SNC Lavalin Group are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SNC Lavalin displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and SNC Lavalin

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

The idea behind Petroleo Brasileiro Petrobras and SNC Lavalin Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.