Correlation Between Petroleo Brasileiro and Cai Lay

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

Diversification Opportunities for Petroleo Brasileiro and Cai Lay

0.09

Correlation Coefficient

Petroleo Brasileiro  Cai Lay

Significant diversification

The 3 months correlation between Petroleo and Cai is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Cai Lay Veterinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cai Lay Veterinary 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 Cai Lay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cai Lay Veterinary has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Cai Lay go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Cai Lay

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Cai Lay. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.9 times less risky than Cai Lay. The stock trades about -0.05 of its potential returns per unit of risk. The Cai Lay Veterinary is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  900,000  in Cai Lay Veterinary on September 29, 2024 and sell it today you would earn a total of  50,000  from holding Cai Lay Veterinary or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	49.21%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Cai Lay Veterinary

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.

Cai Lay Veterinary

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cai Lay Veterinary are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Cai Lay displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Cai Lay

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

The idea behind Petroleo Brasileiro Petrobras and Cai Lay Veterinary 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..