Correlation Between Petroleo Brasileiro and Frontera Energy
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Frontera Energy 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 Frontera Energy 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 Frontera Energy Corp, you can compare the effects of market volatilities on Petroleo Brasileiro and Frontera Energy 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 Frontera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Frontera Energy.
Diversification Opportunities for Petroleo Brasileiro and Frontera Energy
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Petroleo and Frontera is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Frontera Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontera Energy Corp 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 Frontera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontera Energy Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Frontera Energy go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Frontera Energy
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.81 times more return on investment than Frontera Energy. However, Petroleo Brasileiro Petrobras is 1.23 times less risky than Frontera Energy. It trades about 0.07 of its potential returns per unit of risk. Frontera Energy Corp is currently generating about 0.0 per unit of risk. If you would invest 777.00 in Petroleo Brasileiro Petrobras on August 26, 2024 and sell it today you would earn a total of 713.00 from holding Petroleo Brasileiro Petrobras or generate 91.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. Frontera Energy Corp
Performance |
| Timeline |
| Petroleo Brasileiro |
| Frontera Energy Corp |
Petroleo Brasileiro and Frontera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and Frontera Energy
The main advantage of trading using opposite Petroleo Brasileiro and Frontera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Frontera Energy 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 Frontera Energy will offset losses from the drop in Frontera Energy'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 |
| Frontera Energy vs. Petroleo Brasileiro Petrobras | Frontera Energy vs. Equinor ASA ADR | Frontera Energy vs. Eni SpA ADR | Frontera Energy vs. YPF Sociedad Anonima |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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