Correlation Between Petrleo Brasileiro and Centrais Eltricas
Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and Centrais Eltricas 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 Centrais Eltricas 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 Centrais Eltricas Brasileiras, you can compare the effects of market volatilities on Petrleo Brasileiro and Centrais Eltricas 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 Centrais Eltricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and Centrais Eltricas.
Diversification Opportunities for Petrleo Brasileiro and Centrais Eltricas
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Petrleo and Centrais is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Centrais Eltricas Brasileiras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Eltricas 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 Centrais Eltricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Eltricas has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Centrais Eltricas go up and down completely randomly.
Pair Corralation between Petrleo Brasileiro and Centrais Eltricas
Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to generate 1.12 times more return on investment than Centrais Eltricas. However, Petrleo Brasileiro is 1.12 times more volatile than Centrais Eltricas Brasileiras. It trades about 0.34 of its potential returns per unit of risk. Centrais Eltricas Brasileiras is currently generating about -0.23 per unit of risk. If you would invest 3,751 in Petrleo Brasileiro SA on September 1, 2024 and sell it today you would earn a total of 511.00 from holding Petrleo Brasileiro SA or generate 13.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Petrleo Brasileiro SA vs. Centrais Eltricas Brasileiras
Performance |
| Timeline |
| Petrleo Brasileiro |
| Centrais Eltricas |
Petrleo Brasileiro and Centrais Eltricas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrleo Brasileiro and Centrais Eltricas
The main advantage of trading using opposite Petrleo Brasileiro and Centrais Eltricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrleo Brasileiro position performs unexpectedly, Centrais Eltricas 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 Centrais Eltricas will offset losses from the drop in Centrais Eltricas' long position.| Petrleo Brasileiro vs. Vale SA | Petrleo Brasileiro vs. Petrleo Brasileiro SA | Petrleo Brasileiro vs. Banco do Brasil | Petrleo Brasileiro vs. Banco Bradesco SA |
| Centrais Eltricas vs. Centrais Eltricas Brasileiras | Centrais Eltricas vs. Companhia Energtica de | Centrais Eltricas vs. Companhia Paranaense de | Centrais Eltricas vs. Companhia de Saneamento |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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