Correlation Between Petrleo Brasileiro and Seadrill
Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and Seadrill 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 Petrleo Brasileiro and Seadrill 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 Seadrill Limited, you can compare the effects of market volatilities on Petrleo Brasileiro and Seadrill 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 Petrleo Brasileiro with a short position of Seadrill. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and Seadrill.
Diversification Opportunities for Petrleo Brasileiro and Seadrill
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Petrleo and Seadrill is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Seadrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seadrill Limited and Petrleo 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 Seadrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seadrill Limited has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Seadrill go up and down completely randomly.
Pair Corralation between Petrleo Brasileiro and Seadrill
Assuming the 90 days horizon Petrleo Brasileiro is expected to generate 1.09 times less return on investment than Seadrill. But when comparing it to its historical volatility, Petrleo Brasileiro SA is 1.64 times less risky than Seadrill. It trades about 0.02 of its potential returns per unit of risk. Seadrill Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 3,858 in Seadrill Limited on September 12, 2024 and sell it today you would earn a total of 18.00 from holding Seadrill Limited or generate 0.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrleo Brasileiro SA vs. Seadrill Limited
Performance |
| Timeline |
| Petrleo Brasileiro |
| Seadrill Limited |
Petrleo Brasileiro and Seadrill Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrleo Brasileiro and Seadrill
The main advantage of trading using opposite Petrleo Brasileiro and Seadrill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrleo Brasileiro position performs unexpectedly, Seadrill 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 Seadrill will offset losses from the drop in Seadrill's long position.| Petrleo Brasileiro vs. Petroleo Brasileiro Petrobras | Petrleo Brasileiro vs. Equinor ASA ADR | Petrleo Brasileiro vs. Eni SpA ADR | Petrleo Brasileiro vs. YPF Sociedad Anonima |
| Seadrill vs. Nabors Industries | Seadrill vs. Borr Drilling | Seadrill vs. Patterson UTI Energy | Seadrill vs. Noble plc |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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