Correlation Between Petroleo Brasileiro and Payden Floating

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

Diversification Opportunities for Petroleo Brasileiro and Payden Floating

-0.44

Correlation Coefficient

Petroleo Brasileiro  Payden Floating

Very good diversification

The 3 months correlation between Petroleo and Payden is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Payden Floating Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Payden Floating Rate 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 Payden Floating. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Payden Floating Rate has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Payden Floating go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Payden Floating

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 21.96 times more return on investment than Payden Floating. However, Petroleo Brasileiro is 21.96 times more volatile than Payden Floating Rate. It trades about 0.07 of its potential returns per unit of risk. Payden Floating Rate is currently generating about 0.42 per unit of risk. If you would invest  779.00  in Petroleo Brasileiro Petrobras on September 13, 2024 and sell it today you would earn a total of  681.00  from holding Petroleo Brasileiro Petrobras or generate 87.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Payden Floating Rate

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Payden Floating Rate

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Payden Floating Rate are ranked lower than 25 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Payden Floating 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 Payden Floating

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

The idea behind Petroleo Brasileiro Petrobras and Payden Floating Rate 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.