Correlation Between Petroleo Brasileiro and Falmaco Nonwoven

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

Diversification Opportunities for Petroleo Brasileiro and Falmaco Nonwoven

-0.15

Correlation Coefficient

Petroleo Brasileiro  Falmaco Nonwoven

Good diversification

The 3 months correlation between Petroleo and Falmaco is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Falmaco Nonwoven Industri in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Falmaco Nonwoven Industri 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 Falmaco Nonwoven. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Falmaco Nonwoven Industri has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Falmaco Nonwoven go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Falmaco Nonwoven

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Falmaco Nonwoven. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 3.61 times less risky than Falmaco Nonwoven. The stock trades about -0.04 of its potential returns per unit of risk. The Falmaco Nonwoven Industri is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,800  in Falmaco Nonwoven Industri on September 16, 2024 and sell it today you would lose (500.00) from holding Falmaco Nonwoven Industri or give up 5.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Falmaco Nonwoven Industri

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.

Falmaco Nonwoven Industri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Falmaco Nonwoven Industri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Falmaco Nonwoven is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Petroleo Brasileiro and Falmaco Nonwoven

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

The idea behind Petroleo Brasileiro Petrobras and Falmaco Nonwoven Industri 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.