Correlation Between Petroleo Brasileiro and AutoNation
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and AutoNation 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 AutoNation 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 AutoNation, you can compare the effects of market volatilities on Petroleo Brasileiro and AutoNation 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 AutoNation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and AutoNation.
Diversification Opportunities for Petroleo Brasileiro and AutoNation
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Petroleo and AutoNation is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and AutoNation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AutoNation 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 AutoNation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AutoNation has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and AutoNation go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and AutoNation
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.99 times more return on investment than AutoNation. However, Petroleo Brasileiro Petrobras is 1.01 times less risky than AutoNation. It trades about 0.08 of its potential returns per unit of risk. AutoNation is currently generating about 0.05 per unit of risk. If you would invest 656.00 in Petroleo Brasileiro Petrobras on September 25, 2024 and sell it today you would earn a total of 637.00 from holding Petroleo Brasileiro Petrobras or generate 97.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.22% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. AutoNation
Performance |
| Timeline |
| Petroleo Brasileiro |
| AutoNation |
Petroleo Brasileiro and AutoNation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and AutoNation
The main advantage of trading using opposite Petroleo Brasileiro and AutoNation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, AutoNation 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 AutoNation will offset losses from the drop in AutoNation's long position.The idea behind Petroleo Brasileiro Petrobras and AutoNation 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.| AutoNation vs. Copart Inc | AutoNation vs. Zhongsheng Group Holdings | AutoNation vs. CarMax Inc | AutoNation vs. DIeteren Group 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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