Correlation Between Petroleo Brasileiro and REC

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

Diversification Opportunities for Petroleo Brasileiro and REC

0.0

Correlation Coefficient

Petroleo Brasileiro  REC

Pay attention - limited upside

The 3 months correlation between Petroleo and REC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and REC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REC 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 REC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REC has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and REC go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and REC

If you would invest  1,299  in Petroleo Brasileiro Petrobras on January 24, 2024 and sell it today you would earn a total of  395.00  from holding Petroleo Brasileiro Petrobras or generate 30.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  REC

Petroleo Brasileiro

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental drivers, Petroleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in May 2024.

REC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, REC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Petroleo Brasileiro and REC

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

The idea behind Petroleo Brasileiro Petrobras and REC 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.