Correlation Between Petrleo Brasileiro and Vale SA
Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and Vale SA 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 Vale SA 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 Vale SA, you can compare the effects of market volatilities on Petrleo Brasileiro and Vale SA 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 Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and Vale SA.
Diversification Opportunities for Petrleo Brasileiro and Vale SA
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Petrleo and Vale is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale 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 Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Vale SA go up and down completely randomly.
Pair Corralation between Petrleo Brasileiro and Vale SA
Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to generate 0.76 times more return on investment than Vale SA. However, Petrleo Brasileiro SA is 1.32 times less risky than Vale SA. It trades about 0.34 of its potential returns per unit of risk. Vale SA is currently generating about -0.23 per unit of risk. If you would invest 3,609 in Petrleo Brasileiro SA on August 27, 2024 and sell it today you would earn a total of 309.00 from holding Petrleo Brasileiro SA or generate 8.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrleo Brasileiro SA vs. Vale SA
Performance |
| Timeline |
| Petrleo Brasileiro |
| Vale SA |
Petrleo Brasileiro and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrleo Brasileiro and Vale SA
The main advantage of trading using opposite Petrleo Brasileiro and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrleo Brasileiro position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA'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 |
| Vale SA vs. Petrleo Brasileiro SA | Vale SA vs. Banco do Brasil | Vale SA vs. Ita Unibanco Holding | Vale SA 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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