Correlation Between Petróleo Brasileiro and Eni SPA
Can any of the company-specific risk be diversified away by investing in both Petróleo Brasileiro and Eni SPA 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 Petróleo Brasileiro and Eni SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrleo Brasileiro SA and Eni SpA ADR, you can compare the effects of market volatilities on Petróleo Brasileiro and Eni SPA 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 Petróleo Brasileiro with a short position of Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petróleo Brasileiro and Eni SPA.
Diversification Opportunities for Petróleo Brasileiro and Eni SPA
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Petróleo and Eni is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Eni SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA ADR and Petróleo Brasileiro 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 Petrleo Brasileiro SA are associated (or correlated) with Eni SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eni SpA ADR has no effect on the direction of Petróleo Brasileiro i.e., Petróleo Brasileiro and Eni SPA go up and down completely randomly.
Pair Corralation between Petróleo Brasileiro and Eni SPA
Assuming the 90 days horizon Petrleo Brasileiro SA is expected to generate 1.37 times more return on investment than Eni SPA. However, Petróleo Brasileiro is 1.37 times more volatile than Eni SpA ADR. It trades about 0.18 of its potential returns per unit of risk. Eni SpA ADR is currently generating about -0.21 per unit of risk. If you would invest 1,241 in Petrleo Brasileiro SA on August 31, 2024 and sell it today you would earn a total of 74.00 from holding Petrleo Brasileiro SA or generate 5.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrleo Brasileiro SA vs. Eni SpA ADR
Performance |
| Timeline |
| Petróleo Brasileiro |
| Eni SpA ADR |
Petróleo Brasileiro and Eni SPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petróleo Brasileiro and Eni SPA
The main advantage of trading using opposite Petróleo Brasileiro and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petróleo Brasileiro position performs unexpectedly, Eni SPA 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 Eni SPA will offset losses from the drop in Eni SPA's long position.| Petróleo Brasileiro vs. Petroleo Brasileiro Petrobras | Petróleo Brasileiro vs. Equinor ASA ADR | Petróleo Brasileiro vs. Eni SpA ADR | Petróleo Brasileiro vs. YPF Sociedad Anonima |
| Eni SPA vs. TotalEnergies SE ADR | Eni SPA vs. Ecopetrol SA ADR | Eni SPA vs. Shell PLC ADR | Eni SPA vs. Petroleo Brasileiro Petrobras |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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