Correlation Between Petroleo Brasileiro and Chembio Diagnostics

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

Diversification Opportunities for Petroleo Brasileiro and Chembio Diagnostics

0.41
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Petroleo and Chembio is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Chembio Diagnostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chembio Diagnostics 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 Chembio Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chembio Diagnostics has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Chembio Diagnostics go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Chembio Diagnostics

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.38 times more return on investment than Chembio Diagnostics. However, Petroleo Brasileiro Petrobras is 2.6 times less risky than Chembio Diagnostics. It trades about 0.12 of its potential returns per unit of risk. Chembio Diagnostics is currently generating about -0.01 per unit of risk. If you would invest  1,051  in Petroleo Brasileiro Petrobras on September 7, 2022 and sell it today you would earn a total of  70.00  from holding Petroleo Brasileiro Petrobras or generate 6.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Petroleo Brasileiro Petrobras  vs.  Chembio Diagnostics

 Performance (%) 
       Timeline  
Petroleo Brasileiro 
Petroleo Performance
0 of 100
Over the last 90 days Petroleo Brasileiro Petrobras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Petroleo Brasileiro is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Petroleo Price Channel

Chembio Diagnostics 
Chembio Performance
0 of 100
Over the last 90 days Chembio Diagnostics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Chembio Price Channel

Petroleo Brasileiro and Chembio Diagnostics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Petroleo Brasileiro and Chembio Diagnostics

The main advantage of trading using opposite Petroleo Brasileiro and Chembio Diagnostics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Chembio Diagnostics 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 Chembio Diagnostics will offset losses from the drop in Chembio Diagnostics' long position.
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The idea behind Petroleo Brasileiro Petrobras and Chembio Diagnostics 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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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