Correlation Between Petroleo Brasileiro and Guaranty Trust

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

Diversification Opportunities for Petroleo Brasileiro and Guaranty Trust

-0.27

Correlation Coefficient

Petroleo Brasileiro  Guaranty Trust

Very good diversification

The 3 months correlation between Petroleo and Guaranty is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Guaranty Trust Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guaranty Trust Holding 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 Guaranty Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guaranty Trust Holding has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Guaranty Trust go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Guaranty Trust

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.63 times more return on investment than Guaranty Trust. However, Petroleo Brasileiro Petrobras is 1.59 times less risky than Guaranty Trust. It trades about 0.0 of its potential returns per unit of risk. Guaranty Trust Holding is currently generating about -0.03 per unit of risk. If you would invest  1,382  in Petroleo Brasileiro Petrobras on September 20, 2024 and sell it today you would lose (79.00) from holding Petroleo Brasileiro Petrobras or give up 5.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.2%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Guaranty Trust Holding

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 latest unsteady performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Guaranty Trust Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guaranty Trust Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Guaranty Trust is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Petroleo Brasileiro and Guaranty Trust

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

The idea behind Petroleo Brasileiro Petrobras and Guaranty Trust Holding 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 CEOs Directory module to screen CEOs from public companies around the world.