Correlation Between Vale SA and Petroleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Vale SA and Petroleo 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 Vale SA and Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Petroleo Brasileiro SA, you can compare the effects of market volatilities on Vale SA and Petroleo 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 Vale SA with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Petroleo Brasileiro.
Diversification Opportunities for Vale SA and Petroleo Brasileiro
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vale and Petroleo is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Petroleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Vale SA 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 Vale SA are associated (or correlated) with Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of Vale SA i.e., Vale SA and Petroleo Brasileiro go up and down completely randomly.
Pair Corralation between Vale SA and Petroleo Brasileiro
Assuming the 90 days trading horizon Vale SA is expected to under-perform the Petroleo Brasileiro. In addition to that, Vale SA is 1.71 times more volatile than Petroleo Brasileiro SA. It trades about -0.14 of its total potential returns per unit of risk. Petroleo Brasileiro SA is currently generating about 0.31 per unit of volatility. If you would invest 602.00 in Petroleo Brasileiro SA on August 27, 2024 and sell it today you would earn a total of 50.00 from holding Petroleo Brasileiro SA or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Petroleo Brasileiro SA
Performance |
| Timeline |
| Vale SA |
| Petroleo Brasileiro |
Vale SA and Petroleo Brasileiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Petroleo Brasileiro
The main advantage of trading using opposite Vale SA and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Petroleo 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 Petroleo Brasileiro will offset losses from the drop in Petroleo Brasileiro's long position.| Vale SA vs. Squirrel Media SA | Vale SA vs. Labiana Health SA | Vale SA vs. Tier1 Technology SA | Vale SA vs. Inhome Prime Properties |
| Petroleo Brasileiro vs. Energy Solar Tech | Petroleo Brasileiro vs. All Iron Re | Petroleo Brasileiro vs. Borges Agricultural Industrial | Petroleo Brasileiro vs. Home Capital Rentals |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |