Correlation Between Petroleo Brasileiro and Zimmer Biomet

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

Diversification Opportunities for Petroleo Brasileiro and Zimmer Biomet

-0.33

Correlation Coefficient

Petroleo Brasileiro  Zimmer Biomet

Very good diversification

The 3 months correlation between Petroleo and Zimmer is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Zimmer Biomet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zimmer Biomet Holdings 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 Zimmer Biomet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zimmer Biomet Holdings has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Zimmer Biomet go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Zimmer Biomet

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Zimmer Biomet. In addition to that, Petroleo Brasileiro is 1.18 times more volatile than Zimmer Biomet Holdings. It trades about -0.06 of its total potential returns per unit of risk. Zimmer Biomet Holdings is currently generating about 0.08 per unit of volatility. If you would invest  9,476  in Zimmer Biomet Holdings on September 23, 2024 and sell it today you would earn a total of  669.00  from holding Zimmer Biomet Holdings or generate 7.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Zimmer Biomet Holdings

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.

Zimmer Biomet Holdings

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zimmer Biomet Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zimmer Biomet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petroleo Brasileiro and Zimmer Biomet

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

The idea behind Petroleo Brasileiro Petrobras and Zimmer Biomet Holdings 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.