Correlation Between Petroleo Brasileiro and LVMH Moët
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and LVMH Moët 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 LVMH Moët 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 LVMH Mot Hennessy, you can compare the effects of market volatilities on Petroleo Brasileiro and LVMH Moët 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 LVMH Moët. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and LVMH Moët.
Diversification Opportunities for Petroleo Brasileiro and LVMH Moët
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Petroleo and LVMH is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and LVMH Mot Hennessy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LVMH Mot Hennessy 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 LVMH Moët. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LVMH Mot Hennessy has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and LVMH Moët go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and LVMH Moët
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the LVMH Moët. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.31 times less risky than LVMH Moët. The stock trades about -0.02 of its potential returns per unit of risk. The LVMH Mot Hennessy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 12,473 in LVMH Mot Hennessy on September 26, 2024 and sell it today you would lose (73.00) from holding LVMH Mot Hennessy or give up 0.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.62% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. LVMH Mot Hennessy
Performance |
| Timeline |
| Petroleo Brasileiro |
| LVMH Mot Hennessy |
Petroleo Brasileiro and LVMH Moët Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and LVMH Moët
The main advantage of trading using opposite Petroleo Brasileiro and LVMH Moët positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, LVMH Moët 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 LVMH Moët will offset losses from the drop in LVMH Moët's long position.The idea behind Petroleo Brasileiro Petrobras and LVMH Mot Hennessy 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.| LVMH Moët vs. MICRONIC MYDATA | LVMH Moët vs. Hyrican Informationssysteme Aktiengesellschaft | LVMH Moët vs. PKSHA TECHNOLOGY INC | LVMH Moët vs. National Storage Affiliates |
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.
Other Complementary Tools
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |