Correlation Between Petroleo Brasileiro and GATX

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

Diversification Opportunities for Petroleo Brasileiro and GATX

-0.58

Correlation Coefficient

Petroleo Brasileiro  GATX

Excellent diversification

The 3 months correlation between Petroleo and GATX is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and GATX Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GATX 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 GATX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GATX has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and GATX go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and GATX

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.77 times more return on investment than GATX. However, Petroleo Brasileiro is 1.77 times more volatile than GATX Corporation. It trades about 0.02 of its potential returns per unit of risk. GATX Corporation is currently generating about 0.01 per unit of risk. If you would invest  1,667  in Petroleo Brasileiro Petrobras on January 25, 2024 and sell it today you would earn a total of  29.00  from holding Petroleo Brasileiro Petrobras or generate 1.74% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  GATX Corp.

Petroleo Brasileiro

Risk-Adjusted Performance

1 of 100

Weak

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.

GATX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GATX Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, GATX is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and GATX

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

The idea behind Petroleo Brasileiro Petrobras and GATX Corporation 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.