Correlation Between Petroleo Brasileiro and BANPU POWER
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and BANPU POWER 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 BANPU POWER 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 BANPU POWER, you can compare the effects of market volatilities on Petroleo Brasileiro and BANPU POWER 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 BANPU POWER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and BANPU POWER.
Diversification Opportunities for Petroleo Brasileiro and BANPU POWER
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Petroleo and BANPU is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and BANPU POWER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANPU POWER 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 BANPU POWER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANPU POWER has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and BANPU POWER go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and BANPU POWER
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.8 times more return on investment than BANPU POWER. However, Petroleo Brasileiro is 1.8 times more volatile than BANPU POWER. It trades about 0.05 of its potential returns per unit of risk. BANPU POWER is currently generating about -0.02 per unit of risk. If you would invest 1,125 in Petroleo Brasileiro Petrobras on September 12, 2024 and sell it today you would earn a total of 308.00 from holding Petroleo Brasileiro Petrobras or generate 27.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 96.59% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. BANPU POWER
Performance |
| Timeline |
| Petroleo Brasileiro |
| BANPU POWER |
Petroleo Brasileiro and BANPU POWER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and BANPU POWER
The main advantage of trading using opposite Petroleo Brasileiro and BANPU POWER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, BANPU POWER 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 BANPU POWER will offset losses from the drop in BANPU POWER'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 |
| BANPU POWER vs. Charoen Pokphand Foods | BANPU POWER vs. The Siam Cement | BANPU POWER vs. Ratch Group Public | BANPU POWER vs. Amata Public |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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