Correlation Between Petroleo Brasileiro and Prospera Energy
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Prospera 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 Prospera 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 Prospera Energy, you can compare the effects of market volatilities on Petroleo Brasileiro and Prospera 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 Prospera Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Prospera Energy.
Diversification Opportunities for Petroleo Brasileiro and Prospera Energy
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Petroleo and Prospera is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Prospera Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prospera Energy 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 Prospera Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prospera Energy has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Prospera Energy go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Prospera Energy
Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 1.68 times less return on investment than Prospera Energy. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 3.81 times less risky than Prospera Energy. It trades about 0.18 of its potential returns per unit of risk. Prospera Energy is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2.35 in Prospera Energy on September 1, 2024 and sell it today you would earn a total of 0.16 from holding Prospera Energy or generate 6.81% 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. Prospera Energy
Performance |
| Timeline |
| Petroleo Brasileiro |
| Prospera Energy |
Petroleo Brasileiro and Prospera Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and Prospera Energy
The main advantage of trading using opposite Petroleo Brasileiro and Prospera Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Prospera 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 Prospera Energy will offset losses from the drop in Prospera Energy's long position.| Petroleo Brasileiro vs. Shell PLC ADR | Petroleo Brasileiro vs. BP PLC ADR | Petroleo Brasileiro vs. Suncor Energy | Petroleo Brasileiro vs. Equinor ASA ADR |
| Prospera Energy vs. Petroleo Brasileiro Petrobras | Prospera Energy vs. Equinor ASA ADR | Prospera Energy vs. Eni SpA ADR | Prospera 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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