Correlation Between Petrleo Brasileiro and Bradespar

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

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

Diversification Opportunities for Petrleo Brasileiro and Bradespar

0.81

Correlation Coefficient

Petrleo Brasileiro  Bradespar

Very poor diversification

The 3 months correlation between Petrleo and Bradespar is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Bradespar SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bradespar SA and Petrleo 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 Petrleo Brasileiro SA are associated (or correlated) with Bradespar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bradespar SA has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Bradespar go up and down completely randomly.

Pair Corralation between Petrleo Brasileiro and Bradespar

Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to under-perform the Bradespar. In addition to that, Petrleo Brasileiro is 1.7 times more volatile than Bradespar SA. It trades about -0.05 of its total potential returns per unit of risk. Bradespar SA is currently generating about -0.02 per unit of volatility. If you would invest  2,055  in Bradespar SA on February 23, 2024 and sell it today you would lose (48.00) from holding Bradespar SA or give up 2.34% of portfolio value over 90 days.

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

Petrleo Brasileiro SA  vs.  Bradespar SA

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. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bradespar SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bradespar SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bradespar is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Petrleo Brasileiro and Bradespar

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

The idea behind Petrleo Brasileiro SA and Bradespar 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.