Correlation Between Petroleo Brasileiro and Lepanto Consolidated

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

Diversification Opportunities for Petroleo Brasileiro and Lepanto Consolidated

-0.65

Correlation Coefficient

Petroleo Brasileiro  Lepanto Consolidated

Excellent diversification

The 3 months correlation between Petroleo and Lepanto is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Lepanto Consolidated Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lepanto Consolidated 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 Lepanto Consolidated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lepanto Consolidated has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Lepanto Consolidated go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Lepanto Consolidated

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Lepanto Consolidated. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.58 times less risky than Lepanto Consolidated. The stock trades about -0.22 of its potential returns per unit of risk. The Lepanto Consolidated Mining is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6.70  in Lepanto Consolidated Mining on September 24, 2024 and sell it today you would earn a total of  0.10  from holding Lepanto Consolidated Mining or generate 1.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Lepanto Consolidated Mining

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.

Lepanto Consolidated

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lepanto Consolidated Mining are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Lepanto Consolidated exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Lepanto Consolidated

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

The idea behind Petroleo Brasileiro Petrobras and Lepanto Consolidated Mining 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.