Correlation Between Petroleo Brasileiro and Fortuna Silver

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

Diversification Opportunities for Petroleo Brasileiro and Fortuna Silver

PetroleoFortunaDiversified AwayPetroleoFortunaDiversified Away100%
-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Petroleo and Fortuna is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Fortuna Silver Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortuna Silver Mines 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 Fortuna Silver. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortuna Silver Mines has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Fortuna Silver go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Fortuna Silver

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Fortuna Silver. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 2.27 times less risky than Fortuna Silver. The stock trades about -0.03 of its potential returns per unit of risk. The Fortuna Silver Mines is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  676.00  in Fortuna Silver Mines on September 15, 2024 and sell it today you would lose (4.00) from holding Fortuna Silver Mines or give up 0.59% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Petroleo Brasileiro Petrobras  vs.  Fortuna Silver Mines

 Performance 
JavaScript chart by amCharts 3.21.15OctNov -10-5051015
JavaScript chart by amCharts 3.21.15PBR FVI
       Timeline  
Petroleo Brasileiro 

Risk-Adjusted Performance

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Strong
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.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec12.51313.51414.5
Fortuna Silver Mines 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Fortuna Silver Mines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Fortuna Silver is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec66.577.5

Petroleo Brasileiro and Fortuna Silver Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.43-1.82-1.21-0.6-0.010.581.181.792.392.99 0.050.100.15
JavaScript chart by amCharts 3.21.15PBR FVI
       Returns  

Pair Trading with Petroleo Brasileiro and Fortuna Silver

The main advantage of trading using opposite Petroleo Brasileiro and Fortuna Silver positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Fortuna Silver 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 Fortuna Silver will offset losses from the drop in Fortuna Silver's long position.
The idea behind Petroleo Brasileiro Petrobras and Fortuna Silver Mines 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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