Correlation Between Petroleo Brasileiro and ST Dupont

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

Diversification Opportunities for Petroleo Brasileiro and ST Dupont

-0.66

Correlation Coefficient

Petroleo Brasileiro  ST Dupont

Excellent diversification

The 3 months correlation between Petroleo and DPT is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and ST Dupont in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST Dupont 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 ST Dupont. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Dupont has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and ST Dupont go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and ST Dupont

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.53 times more return on investment than ST Dupont. However, Petroleo Brasileiro Petrobras is 1.89 times less risky than ST Dupont. It trades about 0.07 of its potential returns per unit of risk. ST Dupont is currently generating about -0.01 per unit of risk. If you would invest  668.00  in Petroleo Brasileiro Petrobras on September 29, 2024 and sell it today you would earn a total of  595.00  from holding Petroleo Brasileiro Petrobras or generate 89.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  ST Dupont

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.

ST Dupont

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ST Dupont are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ST Dupont sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and ST Dupont

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

The idea behind Petroleo Brasileiro Petrobras and ST Dupont 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.