Correlation Between Petroleo Brasileiro and American International
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and American International 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 American International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petroleo Brasileiro Petrobras and American International Group, you can compare the effects of market volatilities on Petroleo Brasileiro and American International 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 American International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and American International.
Diversification Opportunities for Petroleo Brasileiro and American International
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Petroleo and American is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and American International Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American International 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 Petrobras are associated (or correlated) with American International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American International has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and American International go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and American International
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the American International. In addition to that, Petroleo Brasileiro is 1.52 times more volatile than American International Group. It trades about -0.09 of its total potential returns per unit of risk. American International Group is currently generating about 0.08 per unit of volatility. If you would invest 143,651 in American International Group on September 25, 2024 and sell it today you would earn a total of 7,699 from holding American International Group or generate 5.36% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 96.83% |
Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. American International Group
Performance |
Timeline |
Petroleo Brasileiro |
American International |
Petroleo Brasileiro and American International Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Petroleo Brasileiro and American International
The main advantage of trading using opposite Petroleo Brasileiro and American International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, American International 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 American International will offset losses from the drop in American International's long position.The idea behind Petroleo Brasileiro Petrobras and American International Group 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.American International vs. Delta Air Lines | American International vs. Monster Beverage Corp | American International vs. McEwen Mining | American International vs. Taiwan Semiconductor Manufacturing |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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