Correlation Between Transportadora and Petrleo Brasileiro

Can any of the company-specific risk be diversified away by investing in both Transportadora and Petrleo Brasileiro 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 Transportadora and Petrleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transportadora de Gas and Petrleo Brasileiro SA, you can compare the effects of market volatilities on Transportadora and Petrleo Brasileiro 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 Transportadora with a short position of Petrleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and Petrleo Brasileiro.

Diversification Opportunities for Transportadora and Petrleo Brasileiro

-0.28

Correlation Coefficient

Transportadora  Petrleo Brasileiro

Very good diversification

The 3 months correlation between Transportadora and Petrleo is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrleo Brasileiro and Transportadora 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 Transportadora de Gas are associated (or correlated) with Petrleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrleo Brasileiro has no effect on the direction of Transportadora i.e., Transportadora and Petrleo Brasileiro go up and down completely randomly.

Pair Corralation between Transportadora and Petrleo Brasileiro

Considering the 90-day investment horizon Transportadora de Gas is expected to generate 1.46 times more return on investment than Petrleo Brasileiro. However, Transportadora is 1.46 times more volatile than Petrleo Brasileiro SA. It trades about 0.31 of its potential returns per unit of risk. Petrleo Brasileiro SA is currently generating about -0.11 per unit of risk. If you would invest  1,834  in Transportadora de Gas on September 30, 2024 and sell it today you would earn a total of  1,144  from holding Transportadora de Gas or generate 62.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Transportadora de Gas  vs.  Petrleo Brasileiro SA

Transportadora de Gas

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Transportadora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Petrleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Transportadora and Petrleo Brasileiro

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

The idea behind Transportadora de Gas and Petrleo Brasileiro SA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.