Correlation Between Petrleo Brasileiro and Petro Rio
Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and Petro Rio 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 Petro Rio 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 Petro Rio SA, you can compare the effects of market volatilities on Petrleo Brasileiro and Petro Rio 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 Petro Rio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and Petro Rio.
Diversification Opportunities for Petrleo Brasileiro and Petro Rio
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Petrleo and Petro is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Petro Rio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Rio SA 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 Petro Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Rio SA has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Petro Rio go up and down completely randomly.
Pair Corralation between Petrleo Brasileiro and Petro Rio
Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to generate 1.03 times more return on investment than Petro Rio. However, Petrleo Brasileiro is 1.03 times more volatile than Petro Rio SA. It trades about 0.09 of its potential returns per unit of risk. Petro Rio SA is currently generating about 0.03 per unit of risk. If you would invest 1,892 in Petrleo Brasileiro SA on August 30, 2024 and sell it today you would earn a total of 2,354 from holding Petrleo Brasileiro SA or generate 124.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.0% |
| Values | Daily Returns |
Petrleo Brasileiro SA vs. Petro Rio SA
Performance |
| Timeline |
| Petrleo Brasileiro |
| Petro Rio SA |
Petrleo Brasileiro and Petro Rio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrleo Brasileiro and Petro Rio
The main advantage of trading using opposite Petrleo Brasileiro and Petro Rio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrleo Brasileiro position performs unexpectedly, Petro Rio 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 Petro Rio will offset losses from the drop in Petro Rio'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 |
| Petro Rio vs. Petrleo Brasileiro SA | Petro Rio vs. Banco Bradesco SA | Petro Rio vs. Schlumberger Limited | Petro Rio vs. Ita Unibanco Holding |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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