Correlation Between Petroleo Brasileiro and Citycon Oyj

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

Diversification Opportunities for Petroleo Brasileiro and Citycon Oyj

0.55

Correlation Coefficient

Petroleo Brasileiro  Citycon Oyj

Very weak diversification

The 3 months correlation between Petroleo and Citycon is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Citycon Oyj in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citycon Oyj 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 Citycon Oyj. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citycon Oyj has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Citycon Oyj go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Citycon Oyj

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Citycon Oyj. In addition to that, Petroleo Brasileiro is 1.25 times more volatile than Citycon Oyj. It trades about -0.22 of its total potential returns per unit of risk. Citycon Oyj is currently generating about -0.12 per unit of volatility. If you would invest  326.00  in Citycon Oyj on September 24, 2024 and sell it today you would lose (13.00) from holding Citycon Oyj or give up 3.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Citycon Oyj

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 latest unsteady performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Citycon Oyj

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citycon Oyj has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Petroleo Brasileiro and Citycon Oyj

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

The idea behind Petroleo Brasileiro Petrobras and Citycon Oyj 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.