Correlation Between Petrleo Brasileiro and BP Plc
Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and BP Plc 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 Petrleo Brasileiro and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrleo Brasileiro SA and BP plc, you can compare the effects of market volatilities on Petrleo Brasileiro and BP Plc 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 Petrleo Brasileiro with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and BP Plc.
Diversification Opportunities for Petrleo Brasileiro and BP Plc
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Petrleo and BPN is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Petrleo 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 Petrleo Brasileiro SA are associated (or correlated) with BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and BP Plc go up and down completely randomly.
Pair Corralation between Petrleo Brasileiro and BP Plc
Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to generate 2.57 times more return on investment than BP Plc. However, Petrleo Brasileiro is 2.57 times more volatile than BP plc. It trades about 0.35 of its potential returns per unit of risk. BP plc is currently generating about 0.32 per unit of risk. If you would invest 26,489 in Petrleo Brasileiro SA on September 2, 2024 and sell it today you would earn a total of 3,253 from holding Petrleo Brasileiro SA or generate 12.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrleo Brasileiro SA vs. BP plc
Performance |
| Timeline |
| Petrleo Brasileiro |
| BP plc |
Petrleo Brasileiro and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrleo Brasileiro and BP Plc
The main advantage of trading using opposite Petrleo Brasileiro and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrleo Brasileiro position performs unexpectedly, BP Plc 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 BP Plc will offset losses from the drop in BP Plc's long position.| Petrleo Brasileiro vs. Exxon Mobil | Petrleo Brasileiro vs. Chevron Corp | Petrleo Brasileiro vs. TotalEnergies SE |
| BP Plc vs. Exxon Mobil | BP Plc vs. Chevron Corp | BP Plc vs. TotalEnergies SE | BP Plc vs. Petrleo Brasileiro 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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