Correlation Between Petroleo Brasileiro and Leverage Shares

Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Leverage Shares 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 Leverage Shares 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 Leverage Shares 3x, you can compare the effects of market volatilities on Petroleo Brasileiro and Leverage Shares 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 Leverage Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Leverage Shares.

Diversification Opportunities for Petroleo Brasileiro and Leverage Shares

0.33

Correlation Coefficient

Petroleo Brasileiro  Leverage Shares

Weak diversification

The 3 months correlation between Petroleo and Leverage is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Leverage Shares 3x in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leverage Shares 3x 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 Leverage Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leverage Shares 3x has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Leverage Shares go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Leverage Shares

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Leverage Shares. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 6.73 times less risky than Leverage Shares. The stock trades about -0.09 of its potential returns per unit of risk. The Leverage Shares 3x is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,226  in Leverage Shares 3x on September 25, 2024 and sell it today you would lose (129.00) from holding Leverage Shares 3x or give up 10.52% of portfolio value over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Leverage Shares 3x

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 conflicting 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.

Leverage Shares 3x

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Leverage Shares 3x are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Leverage Shares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Leverage Shares

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

The idea behind Petroleo Brasileiro Petrobras and Leverage Shares 3x 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.