Correlation Between Petroleo Brasileiro and Westwater Resources
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Westwater Resources 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 Westwater Resources 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 Westwater Resources, you can compare the effects of market volatilities on Petroleo Brasileiro and Westwater Resources 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 Westwater Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Westwater Resources.
Diversification Opportunities for Petroleo Brasileiro and Westwater Resources
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Petroleo and Westwater is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Westwater Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westwater Resources 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 Westwater Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westwater Resources has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Westwater Resources go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Westwater Resources
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.44 times more return on investment than Westwater Resources. However, Petroleo Brasileiro Petrobras is 2.28 times less risky than Westwater Resources. It trades about -0.02 of its potential returns per unit of risk. Westwater Resources is currently generating about -0.14 per unit of risk. If you would invest 1,327 in Petroleo Brasileiro Petrobras on September 25, 2024 and sell it today you would lose (24.00) from holding Petroleo Brasileiro Petrobras or give up 1.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. Westwater Resources
Performance |
| Timeline |
| Petroleo Brasileiro |
| Westwater Resources |
Petroleo Brasileiro and Westwater Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and Westwater Resources
The main advantage of trading using opposite Petroleo Brasileiro and Westwater Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Westwater Resources 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 Westwater Resources will offset losses from the drop in Westwater Resources' long position.The idea behind Petroleo Brasileiro Petrobras and Westwater Resources 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.| Westwater Resources vs. Columbia Sportswear | Westwater Resources vs. InPlay Oil Corp | Westwater Resources vs. Playtech plc | Westwater Resources vs. Pentair plc |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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