Correlation Between Petroleo Brasileiro and Nippon Paint
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Nippon Paint 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 Nippon Paint 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 Nippon Paint Holdings, you can compare the effects of market volatilities on Petroleo Brasileiro and Nippon Paint 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 Nippon Paint. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Nippon Paint.
Diversification Opportunities for Petroleo Brasileiro and Nippon Paint
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Petroleo and Nippon is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Nippon Paint Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Paint Holdings 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 Nippon Paint. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Paint Holdings has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Nippon Paint go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Nippon Paint
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.48 times more return on investment than Nippon Paint. However, Petroleo Brasileiro Petrobras is 2.08 times less risky than Nippon Paint. It trades about 0.06 of its potential returns per unit of risk. Nippon Paint Holdings is currently generating about 0.0 per unit of risk. If you would invest 756.00 in Petroleo Brasileiro Petrobras on January 10, 2025 and sell it today you would earn a total of 465.00 from holding Petroleo Brasileiro Petrobras or generate 61.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 91.09% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. Nippon Paint Holdings
Performance |
| Timeline |
| Petroleo Brasileiro |
| Nippon Paint Holdings |
Petroleo Brasileiro and Nippon Paint Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and Nippon Paint
The main advantage of trading using opposite Petroleo Brasileiro and Nippon Paint positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Nippon Paint 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 Nippon Paint will offset losses from the drop in Nippon Paint'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 |
| Nippon Paint vs. PennyMac Mortgage Investment | Nippon Paint vs. Goosehead Insurance | Nippon Paint vs. Shimmick Common | Nippon Paint vs. East Africa Metals |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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