Correlation Between Petroleo Brasileiro and Parkland
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Parkland 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 Parkland 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 Parkland, you can compare the effects of market volatilities on Petroleo Brasileiro and Parkland 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 Parkland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Parkland.
Diversification Opportunities for Petroleo Brasileiro and Parkland
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Petroleo and Parkland is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Parkland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parkland 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 Parkland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parkland has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Parkland go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Parkland
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.8 times more return on investment than Parkland. However, Petroleo Brasileiro Petrobras is 1.26 times less risky than Parkland. It trades about 0.07 of its potential returns per unit of risk. Parkland is currently generating about 0.03 per unit of risk. If you would invest 777.00 in Petroleo Brasileiro Petrobras on August 28, 2024 and sell it today you would earn a total of 702.00 from holding Petroleo Brasileiro Petrobras or generate 90.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.11% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. Parkland
Performance |
| Timeline |
| Petroleo Brasileiro |
| Parkland |
Petroleo Brasileiro and Parkland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and Parkland
The main advantage of trading using opposite Petroleo Brasileiro and Parkland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Parkland 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 Parkland will offset losses from the drop in Parkland's long position.The idea behind Petroleo Brasileiro Petrobras and Parkland 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.| Parkland vs. Meso Numismatics | Parkland vs. Tandy Leather Factory | Parkland vs. EVgo Equity Warrants | Parkland vs. Sally Beauty Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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