Correlation Between Petroleo Brasileiro and 12674TAA4

Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and 12674TAA4 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 12674TAA4 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 CW Senior Financing, you can compare the effects of market volatilities on Petroleo Brasileiro and 12674TAA4 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 12674TAA4. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and 12674TAA4.

Diversification Opportunities for Petroleo Brasileiro and 12674TAA4

-0.1

Correlation Coefficient

Petroleo Brasileiro  12674TAA4

Good diversification

The 3 months correlation between Petroleo and 12674TAA4 is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and CW Senior Financing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CW Senior Financing 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 12674TAA4. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CW Senior Financing has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and 12674TAA4 go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and 12674TAA4

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 14.59 times less return on investment than 12674TAA4. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 22.9 times less risky than 12674TAA4. It trades about 0.07 of its potential returns per unit of risk. CW Senior Financing is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  9,232  in CW Senior Financing on September 18, 2024 and sell it today you would lose (57.00) from holding CW Senior Financing or give up 0.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	87.47%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  CW Senior Financing

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.

CW Senior Financing

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days CW Senior Financing has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CW Senior Financing investors.

Pair Trading with Petroleo Brasileiro and 12674TAA4

The main advantage of trading using opposite Petroleo Brasileiro and 12674TAA4 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, 12674TAA4 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 12674TAA4 will offset losses from the drop in 12674TAA4's long position.

The idea behind Petroleo Brasileiro Petrobras and CW Senior Financing 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.