Correlation Between Petroleo Brasileiro and Gemfields Group
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Gemfields Group 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 Gemfields Group 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 Gemfields Group Limited, you can compare the effects of market volatilities on Petroleo Brasileiro and Gemfields Group 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 Gemfields Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Gemfields Group.
Diversification Opportunities for Petroleo Brasileiro and Gemfields Group
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Petroleo and Gemfields is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Gemfields Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gemfields Group 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 Gemfields Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gemfields Group has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Gemfields Group go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Gemfields Group
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.32 times more return on investment than Gemfields Group. However, Petroleo Brasileiro Petrobras is 3.17 times less risky than Gemfields Group. It trades about -0.22 of its potential returns per unit of risk. Gemfields Group Limited is currently generating about -0.23 per unit of risk. If you would invest 1,424 in Petroleo Brasileiro Petrobras on September 25, 2024 and sell it today you would lose (121.00) from holding Petroleo Brasileiro Petrobras or give up 8.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. Gemfields Group Limited
Performance |
| Timeline |
| Petroleo Brasileiro |
| Gemfields Group |
Petroleo Brasileiro and Gemfields Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and Gemfields Group
The main advantage of trading using opposite Petroleo Brasileiro and Gemfields Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Gemfields Group 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 Gemfields Group will offset losses from the drop in Gemfields Group's long position.The idea behind Petroleo Brasileiro Petrobras and Gemfields Group Limited 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.| Gemfields Group vs. Fresnillo plc | Gemfields Group vs. NEW PACIFIC METALS | Gemfields Group vs. THARISA NON LIST | Gemfields Group vs. SYLVANIA PLAT DL |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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