Correlation Between Forum Energy and Petroleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Forum Energy and Petroleo 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 Forum Energy and Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Forum Energy Metals and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Forum Energy and Petroleo 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 Forum Energy with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Forum Energy and Petroleo Brasileiro.
Diversification Opportunities for Forum Energy and Petroleo Brasileiro
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Forum and Petroleo is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Forum Energy Metals and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Forum Energy 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 Forum Energy Metals are associated (or correlated) with Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of Forum Energy i.e., Forum Energy and Petroleo Brasileiro go up and down completely randomly.
Pair Corralation between Forum Energy and Petroleo Brasileiro
Assuming the 90 days horizon Forum Energy Metals is expected to generate 5.57 times more return on investment than Petroleo Brasileiro. However, Forum Energy is 5.57 times more volatile than Petroleo Brasileiro Petrobras. It trades about 0.03 of its potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about -0.04 per unit of risk. If you would invest 7.00 in Forum Energy Metals on August 29, 2024 and sell it today you would lose (0.25) from holding Forum Energy Metals or give up 3.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Forum Energy Metals vs. Petroleo Brasileiro Petrobras
Performance |
| Timeline |
| Forum Energy Metals |
| Petroleo Brasileiro |
Forum Energy and Petroleo Brasileiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Forum Energy and Petroleo Brasileiro
The main advantage of trading using opposite Forum Energy and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Forum Energy position performs unexpectedly, Petroleo 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 Petroleo Brasileiro will offset losses from the drop in Petroleo Brasileiro's long position.| Forum Energy vs. Namibia Critical Metals | Forum Energy vs. Themac Resources Group | Forum Energy vs. Pasinex Resources Limited | Forum Energy vs. NGEx Minerals |
| Petroleo Brasileiro vs. Ecopetrol SA ADR | Petroleo Brasileiro vs. Equinor ASA ADR | Petroleo Brasileiro vs. Eni SpA ADR | Petroleo Brasileiro vs. Cenovus Energy |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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