Correlation Between Petroleo Brasileiro and Credit Agricole

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

Diversification Opportunities for Petroleo Brasileiro and Credit Agricole

0.06

Correlation Coefficient

Petroleo Brasileiro  Credit Agricole

Significant diversification

The 3 months correlation between Petroleo and Credit is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Credit Agricole Egypt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Credit Agricole Egypt 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 Credit Agricole. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Credit Agricole Egypt has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Credit Agricole go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Credit Agricole

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Credit Agricole. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.23 times less risky than Credit Agricole. The stock trades about -0.04 of its potential returns per unit of risk. The Credit Agricole Egypt is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,968  in Credit Agricole Egypt on September 17, 2024 and sell it today you would earn a total of  136.00  from holding Credit Agricole Egypt or generate 6.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Credit Agricole Egypt

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Credit Agricole Egypt

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Credit Agricole Egypt are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Credit Agricole may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petroleo Brasileiro and Credit Agricole

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

The idea behind Petroleo Brasileiro Petrobras and Credit Agricole Egypt 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.