Correlation Between Petroleo Brasileiro and EasyJet PLC
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and EasyJet PLC 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 EasyJet PLC 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 EasyJet PLC, you can compare the effects of market volatilities on Petroleo Brasileiro and EasyJet PLC 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 EasyJet PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and EasyJet PLC.
Diversification Opportunities for Petroleo Brasileiro and EasyJet PLC
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Petroleo and EasyJet is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and EasyJet PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EasyJet PLC 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 EasyJet PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EasyJet PLC has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and EasyJet PLC go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and EasyJet PLC
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.71 times more return on investment than EasyJet PLC. However, Petroleo Brasileiro is 1.71 times more volatile than EasyJet PLC. It trades about -0.02 of its potential returns per unit of risk. EasyJet PLC is currently generating about -0.5 per unit of risk. If you would invest 1,356 in Petroleo Brasileiro Petrobras on October 12, 2024 and sell it today you would lose (16.00) from holding Petroleo Brasileiro Petrobras or give up 1.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. EasyJet PLC
Performance |
| Timeline |
| Petroleo Brasileiro |
| EasyJet PLC |
Petroleo Brasileiro and EasyJet PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and EasyJet PLC
The main advantage of trading using opposite Petroleo Brasileiro and EasyJet PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, EasyJet PLC 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 EasyJet PLC will offset losses from the drop in EasyJet PLC'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 |
| EasyJet PLC vs. Cornish Metals | EasyJet PLC vs. Applied Materials | EasyJet PLC vs. Travel Leisure Co | EasyJet PLC vs. Capital Metals 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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