Correlation Between Petroleo Brasileiro and Element Solutions
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Element Solutions 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 Element Solutions 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 Element Solutions, you can compare the effects of market volatilities on Petroleo Brasileiro and Element Solutions 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 Element Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Element Solutions.
Diversification Opportunities for Petroleo Brasileiro and Element Solutions
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Petroleo and Element is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Element Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Element Solutions 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 Element Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Element Solutions has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Element Solutions go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Element Solutions
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.34 times more return on investment than Element Solutions. However, Petroleo Brasileiro is 1.34 times more volatile than Element Solutions. It trades about -0.24 of its potential returns per unit of risk. Element Solutions is currently generating about -0.41 per unit of risk. If you would invest 1,424 in Petroleo Brasileiro Petrobras on September 24, 2024 and sell it today you would lose (131.00) from holding Petroleo Brasileiro Petrobras or give up 9.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. Element Solutions
Performance |
| Timeline |
| Petroleo Brasileiro |
| Element Solutions |
Petroleo Brasileiro and Element Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and Element Solutions
The main advantage of trading using opposite Petroleo Brasileiro and Element Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Element Solutions 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 Element Solutions will offset losses from the drop in Element Solutions' long position.The idea behind Petroleo Brasileiro Petrobras and Element Solutions 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.| Element Solutions vs. JD SPORTS FASH | Element Solutions vs. PLAYTIKA HOLDING DL 01 | Element Solutions vs. Live Nation Entertainment | Element Solutions vs. Ubisoft Entertainment SA |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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