Correlation Between Arca Continental and Petroleo Brasileiro

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Can any of the company-specific risk be diversified away by investing in both Arca Continental and Petroleo 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 Arca Continental and Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arca Continental SAB and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Arca Continental and Petroleo 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 Arca Continental with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arca Continental and Petroleo Brasileiro.

Diversification Opportunities for Arca Continental and Petroleo Brasileiro

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between EMBVF and Petroleo is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Arca Continental SAB and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Arca Continental 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 Arca Continental SAB are associated (or correlated) with Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of Arca Continental i.e., Arca Continental and Petroleo Brasileiro go up and down completely randomly.

Pair Corralation between Arca Continental and Petroleo Brasileiro

Assuming the 90 days horizon Arca Continental SAB is expected to generate 0.79 times more return on investment than Petroleo Brasileiro. However, Arca Continental SAB is 1.27 times less risky than Petroleo Brasileiro. It trades about 0.06 of its potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about 0.02 per unit of risk. If you would invest  794.00  in Arca Continental SAB on November 2, 2022 and sell it today you would earn a total of  55.00  from holding Arca Continental SAB or generate 6.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy88.33%
ValuesDaily Returns

Arca Continental SAB  vs.  Petroleo Brasileiro Petrobras

 Performance (%) 
       Timeline  
Arca Continental SAB 
EMBVF Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Arca Continental SAB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Arca Continental may actually be approaching a critical reversion point that can send shares even higher in March 2023.

EMBVF Price Channel

Petroleo Brasileiro 
Petroleo Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Petroleo Price Channel

Arca Continental and Petroleo Brasileiro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Arca Continental and Petroleo Brasileiro

The main advantage of trading using opposite Arca Continental and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arca Continental position performs unexpectedly, Petroleo 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 Petroleo Brasileiro will offset losses from the drop in Petroleo Brasileiro's long position.
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The idea behind Arca Continental SAB and Petroleo Brasileiro Petrobras 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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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.

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