Correlation Between Gold Fields and Petroleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Gold Fields 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 Gold Fields and Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gold Fields Ltd and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Gold Fields 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 Gold Fields with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gold Fields and Petroleo Brasileiro.
Diversification Opportunities for Gold Fields and Petroleo Brasileiro
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Gold and Petroleo is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Gold Fields Ltd and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Gold Fields 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 Gold Fields Ltd 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 Gold Fields i.e., Gold Fields and Petroleo Brasileiro go up and down completely randomly.
Pair Corralation between Gold Fields and Petroleo Brasileiro
Considering the 90-day investment horizon Gold Fields is expected to generate 1.37 times less return on investment than Petroleo Brasileiro. In addition to that, Gold Fields is 1.35 times more volatile than Petroleo Brasileiro Petrobras. It trades about 0.04 of its total potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about 0.07 per unit of volatility. If you would invest 777.00 in Petroleo Brasileiro Petrobras on August 28, 2024 and sell it today you would earn a total of 702.00 from holding Petroleo Brasileiro Petrobras or generate 90.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Gold Fields Ltd vs. Petroleo Brasileiro Petrobras
Performance |
| Timeline |
| Gold Fields |
| Petroleo Brasileiro |
Gold Fields and Petroleo Brasileiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Gold Fields and Petroleo Brasileiro
The main advantage of trading using opposite Gold Fields and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gold Fields 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.| Gold Fields vs. Agnico Eagle Mines | Gold Fields vs. Kinross Gold | Gold Fields vs. Harmony Gold Mining | Gold Fields vs. Franco Nevada |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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