Correlation Between Petroleo Brasileiro and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Dow Jones 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 Petroleo Brasileiro and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petroleo Brasileiro SA and Dow Jones Industrial, you can compare the effects of market volatilities on Petroleo Brasileiro and Dow Jones 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 Petroleo Brasileiro with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Dow Jones.
Diversification Opportunities for Petroleo Brasileiro and Dow Jones
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Petroleo and Dow is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro SA and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Petroleo 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 Petroleo Brasileiro SA are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Dow Jones go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Dow Jones
Assuming the 90 days trading horizon Petroleo Brasileiro SA is expected to generate 1.36 times more return on investment than Dow Jones. However, Petroleo Brasileiro is 1.36 times more volatile than Dow Jones Industrial. It trades about 0.26 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 598.00 in Petroleo Brasileiro SA on August 30, 2024 and sell it today you would earn a total of 44.00 from holding Petroleo Brasileiro SA or generate 7.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Petroleo Brasileiro SA vs. Dow Jones Industrial
Performance |
| Timeline |
Petroleo Brasileiro and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Petroleo Brasileiro SA
Pair trading matchups for Petroleo Brasileiro
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Petroleo Brasileiro and Dow Jones
The main advantage of trading using opposite Petroleo Brasileiro and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Petroleo Brasileiro vs. Neinor Homes SLU | Petroleo Brasileiro vs. Technomeca Aerospace SA | Petroleo Brasileiro vs. Inhome Prime Properties | Petroleo Brasileiro vs. Melia Hotels |
| Dow Jones vs. Skillful Craftsman Education | Dow Jones vs. Acco Brands | Dow Jones vs. Cracker Barrel Old | Dow Jones vs. Coursera |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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