Correlation Between Petroleo Brasileiro and Sterling Capital
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Sterling Capital 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 Petroleo Brasileiro and Sterling Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petroleo Brasileiro Petrobras and Sterling Capital Total, you can compare the effects of market volatilities on Petroleo Brasileiro and Sterling Capital 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 Petroleo Brasileiro with a short position of Sterling Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Sterling Capital.
Diversification Opportunities for Petroleo Brasileiro and Sterling Capital
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Petroleo and Sterling is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Sterling Capital Total in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Capital Total and Petroleo 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 Petroleo Brasileiro Petrobras are associated (or correlated) with Sterling Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Capital Total has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Sterling Capital go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Sterling Capital
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 7.26 times more return on investment than Sterling Capital. However, Petroleo Brasileiro is 7.26 times more volatile than Sterling Capital Total. It trades about 0.07 of its potential returns per unit of risk. Sterling Capital Total is currently generating about 0.08 per unit of risk. If you would invest 762.00 in Petroleo Brasileiro Petrobras on September 14, 2024 and sell it today you would earn a total of 599.00 from holding Petroleo Brasileiro Petrobras or generate 78.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. Sterling Capital Total
Performance |
| Timeline |
| Petroleo Brasileiro |
| Sterling Capital Total |
Petroleo Brasileiro and Sterling Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and Sterling Capital
The main advantage of trading using opposite Petroleo Brasileiro and Sterling Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Sterling Capital 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 Sterling Capital will offset losses from the drop in Sterling Capital's long position.| Petroleo Brasileiro vs. Ecopetrol SA ADR | Petroleo Brasileiro vs. Equinor ASA ADR | Petroleo Brasileiro vs. Eni SpA ADR | Petroleo Brasileiro vs. Cenovus Energy |
| Sterling Capital vs. Blackrock California Municipal | Sterling Capital vs. Blackrock Balanced Capital | Sterling Capital vs. Blackrock Eurofund Class | Sterling Capital vs. Blackrock Funds |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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