Correlation Between Petroleo Brasileiro and Ultrashort Latin

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

Diversification Opportunities for Petroleo Brasileiro and Ultrashort Latin

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Petroleo and Ultrashort is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Ultrashort Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Latin America 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 Ultrashort Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Latin America has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Ultrashort Latin go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Ultrashort Latin

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Ultrashort Latin. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.5 times less risky than Ultrashort Latin. The stock trades about -0.03 of its potential returns per unit of risk. The Ultrashort Latin America is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  3,520  in Ultrashort Latin America on September 19, 2024 and sell it today you would earn a total of  1,041  from holding Ultrashort Latin America or generate 29.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.44%
ValuesDaily Returns

Petroleo Brasileiro Petrobras  vs.  Ultrashort Latin America

 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.
Ultrashort Latin America 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort Latin America are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrashort Latin showed solid returns over the last few months and may actually be approaching a breakup point.

Petroleo Brasileiro and Ultrashort Latin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Petroleo Brasileiro and Ultrashort Latin

The main advantage of trading using opposite Petroleo Brasileiro and Ultrashort Latin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Ultrashort Latin 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 Ultrashort Latin will offset losses from the drop in Ultrashort Latin's long position.
The idea behind Petroleo Brasileiro Petrobras and Ultrashort Latin America 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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