Correlation Between Petroleo Brasileiro and SANTANDER

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

Diversification Opportunities for Petroleo Brasileiro and SANTANDER

0.11

Correlation Coefficient

Petroleo Brasileiro  SANTANDER

Average diversification

The 3 months correlation between Petroleo and SANTANDER is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and SANTANDER HOLDINGS USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SANTANDER HOLDINGS USA 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 SANTANDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SANTANDER HOLDINGS USA has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and SANTANDER go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and SANTANDER

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the SANTANDER. In addition to that, Petroleo Brasileiro is 2.89 times more volatile than SANTANDER HOLDINGS USA. It trades about -0.04 of its total potential returns per unit of risk. SANTANDER HOLDINGS USA is currently generating about -0.01 per unit of volatility. If you would invest  9,729  in SANTANDER HOLDINGS USA on September 16, 2024 and sell it today you would lose (28.00) from holding SANTANDER HOLDINGS USA or give up 0.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  SANTANDER HOLDINGS USA

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.

SANTANDER HOLDINGS USA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Petroleo Brasileiro and SANTANDER

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

The idea behind Petroleo Brasileiro Petrobras and SANTANDER HOLDINGS USA 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.

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.