Correlation Between Petroleo Brasileiro and Cruzeiro
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Cruzeiro 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 Cruzeiro 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 Cruzeiro do Sul, you can compare the effects of market volatilities on Petroleo Brasileiro and Cruzeiro 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 Cruzeiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Cruzeiro.
Diversification Opportunities for Petroleo Brasileiro and Cruzeiro
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Petroleo and Cruzeiro is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Cruzeiro do Sul in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cruzeiro do Sul 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 Cruzeiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cruzeiro do Sul has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Cruzeiro go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Cruzeiro
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.57 times more return on investment than Cruzeiro. However, Petroleo Brasileiro Petrobras is 1.77 times less risky than Cruzeiro. It trades about 0.02 of its potential returns per unit of risk. Cruzeiro do Sul is currently generating about -0.01 per unit of risk. If you would invest 1,210 in Petroleo Brasileiro Petrobras on September 26, 2024 and sell it today you would earn a total of 83.00 from holding Petroleo Brasileiro Petrobras or generate 6.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. Cruzeiro do Sul
Performance |
| Timeline |
| Petroleo Brasileiro |
| Cruzeiro do Sul |
Petroleo Brasileiro and Cruzeiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and Cruzeiro
The main advantage of trading using opposite Petroleo Brasileiro and Cruzeiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Cruzeiro 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 Cruzeiro will offset losses from the drop in Cruzeiro's long position.The idea behind Petroleo Brasileiro Petrobras and Cruzeiro do Sul pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Cruzeiro vs. New Oriental Education | Cruzeiro vs. TAL Education Group | Cruzeiro vs. Yduqs Participaes SA | Cruzeiro vs. GAEC Educacao SA |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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