Correlation Between Petrleo Brasileiro and BP Plc

Specify exactly 2 symbols:
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

PetrleoB1PP34Diversified AwayPetrleoB1PP34Diversified Away100%
0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Petrleo and B1PP34 is 0.65. 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 is expected to generate 1.33 times less return on investment than BP Plc. But when comparing it to its historical volatility, Petrleo Brasileiro SA is 1.47 times less risky than BP Plc. It trades about 0.14 of its potential returns per unit of risk. BP plc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,606  in BP plc on November 25, 2024 and sell it today you would earn a total of  230.00  from holding BP plc or generate 4.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Petrleo Brasileiro SA  vs.  BP plc

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 5101520
JavaScript chart by amCharts 3.21.15PETR3 B1PP34
       Timeline  
Petrleo Brasileiro 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Petrleo Brasileiro SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Petrleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb38.53939.54040.54141.54242.5
BP plc 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in BP plc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BP Plc sustained solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb404244464850

Petrleo Brasileiro and BP Plc Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-5.53-4.14-2.76-1.370.01.422.884.355.817.28 0.020.040.060.080.100.120.14
JavaScript chart by amCharts 3.21.15PETR3 B1PP34
       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.
The idea behind Petrleo Brasileiro SA and BP plc 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.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

Other Complementary Tools

Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Sectors
List of equity sectors categorizing publicly traded companies based on their primary business activities
Idea Optimizer
Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio
Insider Screener
Find insiders across different sectors to evaluate their impact on performance
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios