Correlation Between Petroleo Brasileiro and CF Acquisition

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

Diversification Opportunities for Petroleo Brasileiro and CF Acquisition

-0.26

Correlation Coefficient

Petroleo Brasileiro  CF Acquisition

Very good diversification

The 3 months correlation between Petroleo and CFFSU is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and CF Acquisition VII in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Acquisition VII 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 CF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Acquisition VII has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and CF Acquisition go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and CF Acquisition

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the CF Acquisition. In addition to that, Petroleo Brasileiro is 4.32 times more volatile than CF Acquisition VII. It trades about -0.05 of its total potential returns per unit of risk. CF Acquisition VII is currently generating about 0.16 per unit of volatility. If you would invest  1,078  in CF Acquisition VII on September 18, 2024 and sell it today you would earn a total of  40.00  from holding CF Acquisition VII or generate 3.71% 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.  CF Acquisition VII

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.

CF Acquisition VII

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Acquisition VII are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, CF Acquisition is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Petroleo Brasileiro and CF Acquisition

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

The idea behind Petroleo Brasileiro Petrobras and CF Acquisition VII 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.