Correlation Between Petrleo Brasileiro and Ita Unibanco
Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and Ita Unibanco 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 Ita Unibanco 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 Ita Unibanco Holding, you can compare the effects of market volatilities on Petrleo Brasileiro and Ita Unibanco 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 Ita Unibanco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and Ita Unibanco.
Diversification Opportunities for Petrleo Brasileiro and Ita Unibanco
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Petrleo and Ita is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Ita Unibanco Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ita Unibanco Holding 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 Ita Unibanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ita Unibanco Holding has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Ita Unibanco go up and down completely randomly.
Pair Corralation between Petrleo Brasileiro and Ita Unibanco
Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to generate 1.54 times more return on investment than Ita Unibanco. However, Petrleo Brasileiro is 1.54 times more volatile than Ita Unibanco Holding. It trades about 0.08 of its potential returns per unit of risk. Ita Unibanco Holding is currently generating about 0.04 per unit of risk. If you would invest 3,666 in Petrleo Brasileiro SA on September 1, 2024 and sell it today you would earn a total of 596.00 from holding Petrleo Brasileiro SA or generate 16.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Petrleo Brasileiro SA vs. Ita Unibanco Holding
Performance |
| Timeline |
| Petrleo Brasileiro |
| Ita Unibanco Holding |
Petrleo Brasileiro and Ita Unibanco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrleo Brasileiro and Ita Unibanco
The main advantage of trading using opposite Petrleo Brasileiro and Ita Unibanco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrleo Brasileiro position performs unexpectedly, Ita Unibanco 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 Ita Unibanco will offset losses from the drop in Ita Unibanco's 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 |
| Ita Unibanco vs. Banco do Brasil | Ita Unibanco vs. Banco Bradesco SA | Ita Unibanco vs. Petrleo Brasileiro SA | Ita Unibanco vs. BB Seguridade Participacoes |
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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