Correlation Between Petroleo Brasileiro and Fundamental Indexplus

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

Diversification Opportunities for Petroleo Brasileiro and Fundamental Indexplus

0.03

Correlation Coefficient

Petroleo Brasileiro  Fundamental Indexplus

Significant diversification

The 3 months correlation between Petroleo and Fundamental is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Fundamental Indexplus Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Indexplus 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 Fundamental Indexplus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Indexplus has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Fundamental Indexplus go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Fundamental Indexplus

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Fundamental Indexplus. In addition to that, Petroleo Brasileiro is 2.63 times more volatile than Fundamental Indexplus Tr. It trades about -0.02 of its total potential returns per unit of risk. Fundamental Indexplus Tr is currently generating about -0.05 per unit of volatility. If you would invest  1,482  in Fundamental Indexplus Tr on September 14, 2024 and sell it today you would lose (13.00) from holding Fundamental Indexplus Tr or give up 0.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Fundamental Indexplus Tr

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.

Fundamental Indexplus

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Indexplus Tr are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Fundamental Indexplus 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 Fundamental Indexplus

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

The idea behind Petroleo Brasileiro Petrobras and Fundamental Indexplus Tr 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.