Correlation Between Petroleo Brasileiro and Falcon Products

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

Diversification Opportunities for Petroleo Brasileiro and Falcon Products

0.0

Correlation Coefficient

Petroleo Brasileiro  Falcon Products

Pay attention - limited upside

The 3 months correlation between Petroleo and Falcon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Falcon Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falcon Products 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 Falcon Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falcon Products has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Falcon Products go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Falcon Products

If you would invest (100.00) in Falcon Products on September 18, 2024 and sell it today you would earn a total of  100.00  from holding Falcon Products or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Falcon Products

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.

Falcon Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falcon Products has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Falcon Products is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Petroleo Brasileiro and Falcon Products

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

The idea behind Petroleo Brasileiro Petrobras and Falcon Products 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..