Correlation Between Petroleo Brasileiro and General Engineering

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

Diversification Opportunities for Petroleo Brasileiro and General Engineering

0.24

Correlation Coefficient

Petroleo Brasileiro  General Engineering

Modest diversification

The 3 months correlation between Petroleo and General is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and General Engineering Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Engineering 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 General Engineering. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Engineering has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and General Engineering go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and General Engineering

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 11.98 times less return on investment than General Engineering. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 21.88 times less risky than General Engineering. It trades about 0.07 of its potential returns per unit of risk. General Engineering Public is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  24.00  in General Engineering Public on September 16, 2024 and sell it today you would lose (15.00) from holding General Engineering Public or give up 62.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.18%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  General Engineering Public

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.

General Engineering

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days General Engineering Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Petroleo Brasileiro and General Engineering

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

The idea behind Petroleo Brasileiro Petrobras and General Engineering Public 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.