Correlation Between Petroleo Brasileiro and HEG
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and HEG 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 HEG 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 HEG Limited, you can compare the effects of market volatilities on Petroleo Brasileiro and HEG 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 HEG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and HEG.
Diversification Opportunities for Petroleo Brasileiro and HEG
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between Petroleo and HEG is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited 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 HEG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEG Limited has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and HEG go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and HEG
Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 56.85 times less return on investment than HEG. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 2.73 times less risky than HEG. It trades about 0.01 of its potential returns per unit of risk. HEG Limited is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 41,800 in HEG Limited on September 16, 2024 and sell it today you would earn a total of 15,030 from holding HEG Limited or generate 35.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. HEG Limited
Performance |
| Timeline |
| Petroleo Brasileiro |
| HEG Limited |
Petroleo Brasileiro and HEG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and HEG
The main advantage of trading using opposite Petroleo Brasileiro and HEG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, HEG 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 HEG will offset losses from the drop in HEG'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 |
| HEG vs. Reliance Industries Limited | HEG vs. Oil Natural Gas | HEG vs. ICICI Bank Limited | HEG vs. Bharti Airtel Limited |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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