Correlation Between Freehold Royalties and Petroleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Freehold Royalties 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 Freehold Royalties and Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freehold Royalties and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Freehold Royalties 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 Freehold Royalties with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freehold Royalties and Petroleo Brasileiro.
Diversification Opportunities for Freehold Royalties and Petroleo Brasileiro
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Freehold and Petroleo is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Freehold Royalties and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Freehold Royalties 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 Freehold Royalties 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 Freehold Royalties i.e., Freehold Royalties and Petroleo Brasileiro go up and down completely randomly.
Pair Corralation between Freehold Royalties and Petroleo Brasileiro
Assuming the 90 days horizon Freehold Royalties is expected to generate 3.06 times less return on investment than Petroleo Brasileiro. But when comparing it to its historical volatility, Freehold Royalties is 1.6 times less risky than Petroleo Brasileiro. It trades about 0.08 of its potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,362 in Petroleo Brasileiro Petrobras on August 30, 2024 and sell it today you would earn a total of 74.00 from holding Petroleo Brasileiro Petrobras or generate 5.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freehold Royalties vs. Petroleo Brasileiro Petrobras
Performance |
| Timeline |
| Freehold Royalties |
| Petroleo Brasileiro |
Freehold Royalties and Petroleo Brasileiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freehold Royalties and Petroleo Brasileiro
The main advantage of trading using opposite Freehold Royalties and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freehold Royalties 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.| Freehold Royalties vs. PrairieSky Royalty | Freehold Royalties vs. Tamarack Valley Energy | Freehold Royalties vs. MEG Energy Corp | Freehold Royalties vs. Tourmaline Oil Corp |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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