Correlation Between Petroleo Brasileiro and Euro Trend

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

Diversification Opportunities for Petroleo Brasileiro and Euro Trend

0.44

Correlation Coefficient

Petroleo Brasileiro  Euro Trend

Very weak diversification

The 3 months correlation between Petroleo and Euro is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Euro Trend Yatirim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euro Trend Yatirim 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 Euro Trend. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euro Trend Yatirim has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Euro Trend go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Euro Trend

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Euro Trend. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.22 times less risky than Euro Trend. The stock trades about -0.02 of its potential returns per unit of risk. The Euro Trend Yatirim is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,145  in Euro Trend Yatirim on September 22, 2024 and sell it today you would earn a total of  50.00  from holding Euro Trend Yatirim or generate 4.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Euro Trend Yatirim

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.

Euro Trend Yatirim

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Euro Trend Yatirim has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Petroleo Brasileiro and Euro Trend

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

The idea behind Petroleo Brasileiro Petrobras and Euro Trend Yatirim 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.