Correlation Between Petroleo Brasileiro and NexPoint Diversified

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

Diversification Opportunities for Petroleo Brasileiro and NexPoint Diversified

-0.35

Correlation Coefficient

Petroleo Brasileiro  NexPoint Diversified

Very good diversification

The 3 months correlation between Petroleo and NexPoint is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and NexPoint Diversified Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NexPoint Diversified Real 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 NexPoint Diversified. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NexPoint Diversified Real has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and NexPoint Diversified go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and NexPoint Diversified

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 6.17 times less return on investment than NexPoint Diversified. In addition to that, Petroleo Brasileiro is 2.12 times more volatile than NexPoint Diversified Real. It trades about 0.02 of its total potential returns per unit of risk. NexPoint Diversified Real is currently generating about 0.24 per unit of volatility. If you would invest  1,462  in NexPoint Diversified Real on September 12, 2024 and sell it today you would earn a total of  164.00  from holding NexPoint Diversified Real or generate 11.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  NexPoint Diversified Real

Petroleo Brasileiro

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

NexPoint Diversified Real

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NexPoint Diversified Real are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, NexPoint Diversified may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petroleo Brasileiro and NexPoint Diversified

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

The idea behind Petroleo Brasileiro Petrobras and NexPoint Diversified Real 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.