Correlation Between Petroleo Brasileiro and Stem Cell

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

Diversification Opportunities for Petroleo Brasileiro and Stem Cell

0.64

Correlation Coefficient

Petroleo Brasileiro  Stem Cell

Poor diversification

The 3 months correlation between Petroleo and Stem is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Stem Cell Authority in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Cell Authority 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 Stem Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Cell Authority has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Stem Cell go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Stem Cell

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Stem Cell. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 34.96 times less risky than Stem Cell. The stock trades about -0.02 of its potential returns per unit of risk. The Stem Cell Authority is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Stem Cell Authority on September 13, 2024 and sell it today you would lose (0.54) from holding Stem Cell Authority or give up 27.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Stem Cell Authority

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.

Stem Cell Authority

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stem Cell Authority are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Stem Cell disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Stem Cell

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

The idea behind Petroleo Brasileiro Petrobras and Stem Cell Authority 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.