Correlation Between Petroleo Brasileiro and Rational Real

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

Diversification Opportunities for Petroleo Brasileiro and Rational Real

-0.23

Correlation Coefficient

Petroleo Brasileiro  Rational Real

Very good diversification

The 3 months correlation between Petroleo and Rational is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Rational Real Strategies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rational Real Strategies 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 Rational Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rational Real Strategies has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Rational Real go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Rational Real

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Rational Real. In addition to that, Petroleo Brasileiro is 3.67 times more volatile than Rational Real Strategies. It trades about -0.03 of its total potential returns per unit of risk. Rational Real Strategies is currently generating about -0.1 per unit of volatility. If you would invest  1,652  in Rational Real Strategies on September 19, 2024 and sell it today you would lose (43.00) from holding Rational Real Strategies or give up 2.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Rational Real Strategies

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.

Rational Real Strategies

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Rational Real Strategies has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Rational Real 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 Rational Real

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

The idea behind Petroleo Brasileiro Petrobras and Rational Real Strategies 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.