Correlation Between Chevron Corp and Petrleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Petrleo Brasileiro 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 Chevron Corp and Petrleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Petrleo Brasileiro SA, you can compare the effects of market volatilities on Chevron Corp and Petrleo Brasileiro 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 Chevron Corp with a short position of Petrleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Petrleo Brasileiro.
Diversification Opportunities for Chevron Corp and Petrleo Brasileiro
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chevron and Petrleo is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrleo Brasileiro and Chevron Corp 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 Chevron Corp are associated (or correlated) with Petrleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrleo Brasileiro has no effect on the direction of Chevron Corp i.e., Chevron Corp and Petrleo Brasileiro go up and down completely randomly.
Pair Corralation between Chevron Corp and Petrleo Brasileiro
Assuming the 90 days trading horizon Chevron Corp is expected to generate 1.25 times more return on investment than Petrleo Brasileiro. However, Chevron Corp is 1.25 times more volatile than Petrleo Brasileiro SA. It trades about 0.31 of its potential returns per unit of risk. Petrleo Brasileiro SA is currently generating about 0.22 per unit of risk. If you would invest 295,333 in Chevron Corp on August 24, 2024 and sell it today you would earn a total of 36,267 from holding Chevron Corp or generate 12.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Chevron Corp vs. Petrleo Brasileiro SA
Performance |
| Timeline |
| Chevron Corp |
| Petrleo Brasileiro |
Chevron Corp and Petrleo Brasileiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Petrleo Brasileiro
The main advantage of trading using opposite Chevron Corp and Petrleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Petrleo Brasileiro 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 Petrleo Brasileiro will offset losses from the drop in Petrleo Brasileiro's long position.The idea behind Chevron Corp and Petrleo Brasileiro 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.| Petrleo Brasileiro vs. FIBRA Storage | Petrleo Brasileiro vs. Verizon Communications | Petrleo Brasileiro vs. Samsung Electronics Co | Petrleo Brasileiro vs. Hoteles City Express |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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