Correlation Between Basic Materials and Petro Rio
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Petro Rio 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 Basic Materials and Petro Rio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Petro Rio SA, you can compare the effects of market volatilities on Basic Materials and Petro Rio 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 Basic Materials with a short position of Petro Rio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Petro Rio.
Diversification Opportunities for Basic Materials and Petro Rio
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Basic and Petro is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Petro Rio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Rio SA and Basic Materials 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 Basic Materials are associated (or correlated) with Petro Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Rio SA has no effect on the direction of Basic Materials i.e., Basic Materials and Petro Rio go up and down completely randomly.
Pair Corralation between Basic Materials and Petro Rio
Assuming the 90 days trading horizon Basic Materials is expected to generate 0.58 times more return on investment than Petro Rio. However, Basic Materials is 1.71 times less risky than Petro Rio. It trades about 0.01 of its potential returns per unit of risk. Petro Rio SA is currently generating about -0.06 per unit of risk. If you would invest 575,417 in Basic Materials on August 30, 2024 and sell it today you would earn a total of 750.00 from holding Basic Materials or generate 0.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Basic Materials vs. Petro Rio SA
Performance |
| Timeline |
Basic Materials and Petro Rio Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Petro Rio SA
Pair trading matchups for Petro Rio
Pair Trading with Basic Materials and Petro Rio
The main advantage of trading using opposite Basic Materials and Petro Rio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Petro Rio 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 Petro Rio will offset losses from the drop in Petro Rio's long position.| Basic Materials vs. CM Hospitalar SA | Basic Materials vs. Metalurgica Gerdau SA | Basic Materials vs. Broadcom | Basic Materials vs. Multilaser Industrial SA |
| Petro Rio vs. Petrleo Brasileiro SA | Petro Rio vs. Banco Bradesco SA | Petro Rio vs. Schlumberger Limited | Petro Rio vs. Ita Unibanco Holding |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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