Correlation Between Petróleo Brasileiro and Unit

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

Diversification Opportunities for Petróleo Brasileiro and Unit

-0.48

Correlation Coefficient

Petróleo Brasileiro  Unit

Very good diversification

The 3 months correlation between Petróleo and Unit is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Unit Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unit and Petróleo 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 Unit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unit has no effect on the direction of Petróleo Brasileiro i.e., Petróleo Brasileiro and Unit go up and down completely randomly.

Pair Corralation between Petróleo Brasileiro and Unit

Assuming the 90 days horizon Petróleo Brasileiro is expected to generate 4.22 times less return on investment than Unit. But when comparing it to its historical volatility, Petrleo Brasileiro SA is 8.3 times less risky than Unit. It trades about 0.13 of its potential returns per unit of risk. Unit Corporation is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  37.00  in Unit Corporation on May 4, 2025 and sell it today you would lose (1.00) from holding Unit Corporation or give up 2.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	53.23%
Values	Daily Returns

Petrleo Brasileiro SA  vs.  Unit Corp.

Petróleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petrleo Brasileiro SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Petróleo Brasileiro sustained solid returns over the last few months and may actually be approaching a breakup point.

Unit

Risk-Adjusted Performance

Modest

Over the last 90 days Unit Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly fragile fundamental indicators, Unit showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petróleo Brasileiro and Unit

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

The idea behind Petrleo Brasileiro SA and Unit 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 Transaction History module to view history of all your transactions and understand their impact on performance.