Correlation Between Petroleo Brasileiro and Hedge Logistica

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

Diversification Opportunities for Petroleo Brasileiro and Hedge Logistica

0.32

Correlation Coefficient

Petroleo Brasileiro  Hedge Logistica

Weak diversification

The 3 months correlation between Petroleo and Hedge is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Hedge Logistica Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hedge Logistica Fundo 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 Hedge Logistica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hedge Logistica Fundo has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Hedge Logistica go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Hedge Logistica

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.89 times more return on investment than Hedge Logistica. However, Petroleo Brasileiro is 1.89 times more volatile than Hedge Logistica Fundo. It trades about 0.04 of its potential returns per unit of risk. Hedge Logistica Fundo is currently generating about 0.02 per unit of risk. If you would invest  1,265  in Petroleo Brasileiro Petrobras on September 15, 2024 and sell it today you would earn a total of  96.00  from holding Petroleo Brasileiro Petrobras or generate 7.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Hedge Logistica Fundo

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.

Hedge Logistica Fundo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hedge Logistica Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Hedge Logistica is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and Hedge Logistica

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

The idea behind Petroleo Brasileiro Petrobras and Hedge Logistica Fundo 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.