Correlation Between Petroleo Brasileiro and TMT Investments

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

Diversification Opportunities for Petroleo Brasileiro and TMT Investments

0.32
  Correlation Coefficient

Weak diversification

The 3 months correlation between Petroleo and TMT is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and TMT Investments PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMT Investments PLC 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 TMT Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMT Investments PLC has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and TMT Investments go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and TMT Investments

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.85 times more return on investment than TMT Investments. However, Petroleo Brasileiro Petrobras is 1.17 times less risky than TMT Investments. It trades about -0.02 of its potential returns per unit of risk. TMT Investments PLC is currently generating about -0.23 per unit of risk. If you would invest  1,381  in Petroleo Brasileiro Petrobras on September 14, 2024 and sell it today you would lose (20.00) from holding Petroleo Brasileiro Petrobras or give up 1.45% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Petroleo Brasileiro Petrobras  vs.  TMT Investments PLC

 Performance 
       Timeline  
Petroleo Brasileiro 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
TMT Investments PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days TMT Investments PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Petroleo Brasileiro and TMT Investments Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Petroleo Brasileiro and TMT Investments

The main advantage of trading using opposite Petroleo Brasileiro and TMT Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, TMT Investments 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 TMT Investments will offset losses from the drop in TMT Investments' long position.
The idea behind Petroleo Brasileiro Petrobras and TMT Investments PLC 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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