Correlation Between Petroleo Brasileiro and Central Puerto

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

Diversification Opportunities for Petroleo Brasileiro and Central Puerto

-0.28

Correlation Coefficient

Petroleo Brasileiro  Central Puerto

Very good diversification

The 3 months correlation between Petroleo and Central is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Central Puerto SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Puerto SA 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 Central Puerto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Puerto SA has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Central Puerto go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Central Puerto

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 11.76 times less return on investment than Central Puerto. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.53 times less risky than Central Puerto. It trades about 0.02 of its potential returns per unit of risk. Central Puerto SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  127,000  in Central Puerto SA on September 12, 2024 and sell it today you would earn a total of  26,000  from holding Central Puerto SA or generate 20.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Central Puerto SA

Petroleo Brasileiro

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Central Puerto SA

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Petroleo Brasileiro and Central Puerto

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

The idea behind Petroleo Brasileiro Petrobras and Central Puerto 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.

Check out your portfolio center.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.