Correlation Between Petroleo Brasileiro and PUBLIC

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

Diversification Opportunities for Petroleo Brasileiro and PUBLIC

-0.07

Correlation Coefficient

Petroleo Brasileiro  PUBLIC

Good diversification

The 3 months correlation between Petroleo and PUBLIC is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and PUBLIC SVC O in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PUBLIC SVC O 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 PUBLIC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PUBLIC SVC O has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and PUBLIC go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and PUBLIC

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 20.33 times less return on investment than PUBLIC. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 26.67 times less risky than PUBLIC. It trades about 0.07 of its potential returns per unit of risk. PUBLIC SVC O is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  9,603  in PUBLIC SVC O on September 14, 2024 and sell it today you would lose (30.00) from holding PUBLIC SVC O or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.04%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  PUBLIC SVC O

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.

PUBLIC SVC O

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PUBLIC SVC O has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PUBLIC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and PUBLIC

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

The idea behind Petroleo Brasileiro Petrobras and PUBLIC SVC O 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 Commodity Directory module to find actively traded commodities issued by global exchanges.