Correlation Between United States and Petrleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both United States and Petrleo Brasileiro 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 United States and Petrleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Steel and Petrleo Brasileiro SA, you can compare the effects of market volatilities on United States and Petrleo Brasileiro 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 United States with a short position of Petrleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Petrleo Brasileiro.
Diversification Opportunities for United States and Petrleo Brasileiro
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between United and Petrleo is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrleo Brasileiro and United States 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 United States Steel are associated (or correlated) with Petrleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrleo Brasileiro has no effect on the direction of United States i.e., United States and Petrleo Brasileiro go up and down completely randomly.
Pair Corralation between United States and Petrleo Brasileiro
Given the investment horizon of 90 days United States is expected to generate 1.98 times less return on investment than Petrleo Brasileiro. In addition to that, United States is 2.17 times more volatile than Petrleo Brasileiro SA. It trades about 0.08 of its total potential returns per unit of risk. Petrleo Brasileiro SA is currently generating about 0.35 per unit of volatility. If you would invest 26,489 in Petrleo Brasileiro SA on September 2, 2024 and sell it today you would earn a total of 3,253 from holding Petrleo Brasileiro SA or generate 12.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Petrleo Brasileiro SA
Performance |
| Timeline |
| United States Steel |
| Petrleo Brasileiro |
United States and Petrleo Brasileiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Petrleo Brasileiro
The main advantage of trading using opposite United States and Petrleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Petrleo Brasileiro 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 Petrleo Brasileiro will offset losses from the drop in Petrleo Brasileiro's long position.The idea behind United States Steel and Petrleo Brasileiro SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Petrleo Brasileiro vs. Exxon Mobil | Petrleo Brasileiro vs. Chevron Corp | Petrleo Brasileiro vs. TotalEnergies SE |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Commodity Directory Find actively traded commodities issued by global exchanges |