Correlation Between Petrleo Brasileiro and Exxon Mobil
Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and Exxon Mobil 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 Exxon Mobil 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 Exxon Mobil, you can compare the effects of market volatilities on Petrleo Brasileiro and Exxon Mobil 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 Exxon Mobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and Exxon Mobil.
Diversification Opportunities for Petrleo Brasileiro and Exxon Mobil
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Petrleo and Exxon is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil 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 Exxon Mobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Exxon Mobil go up and down completely randomly.
Pair Corralation between Petrleo Brasileiro and Exxon Mobil
Assuming the 90 days trading horizon Petrleo Brasileiro is expected to generate 4.17 times less return on investment than Exxon Mobil. But when comparing it to its historical volatility, Petrleo Brasileiro SA is 1.16 times less risky than Exxon Mobil. It trades about 0.04 of its potential returns per unit of risk. Exxon Mobil is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 7,985 in Exxon Mobil on September 4, 2024 and sell it today you would earn a total of 973.00 from holding Exxon Mobil or generate 12.19% 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. Exxon Mobil
Performance |
| Timeline |
| Petrleo Brasileiro |
| Exxon Mobil |
Petrleo Brasileiro and Exxon Mobil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrleo Brasileiro and Exxon Mobil
The main advantage of trading using opposite Petrleo Brasileiro and Exxon Mobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrleo Brasileiro position performs unexpectedly, Exxon Mobil 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 Exxon Mobil will offset losses from the drop in Exxon Mobil's long position.| Petrleo Brasileiro vs. Vale SA | Petrleo Brasileiro vs. Banco do Brasil | Petrleo Brasileiro vs. Banco Bradesco SA | Petrleo Brasileiro vs. Ita Unibanco Holding |
| Exxon Mobil vs. Vale SA | Exxon Mobil vs. Petrleo Brasileiro SA | Exxon Mobil vs. Banco do Brasil | Exxon Mobil vs. Banco Bradesco 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital |