Correlation Between Petroleo Brasileiro and ASX
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and ASX 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 ASX 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 ASX Limited, you can compare the effects of market volatilities on Petroleo Brasileiro and ASX 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 ASX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and ASX.
Diversification Opportunities for Petroleo Brasileiro and ASX
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Petroleo and ASX is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and ASX Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASX Limited 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 ASX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASX Limited has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and ASX go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and ASX
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the ASX. In addition to that, Petroleo Brasileiro is 1.22 times more volatile than ASX Limited. It trades about -0.06 of its total potential returns per unit of risk. ASX Limited is currently generating about 0.0 per unit of volatility. If you would invest 3,880 in ASX Limited on September 27, 2024 and sell it today you would lose (20.00) from holding ASX Limited or give up 0.52% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 98.44% |
Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. ASX Limited
Performance |
Timeline |
Petroleo Brasileiro |
ASX Limited |
Petroleo Brasileiro and ASX Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Petroleo Brasileiro and ASX
The main advantage of trading using opposite Petroleo Brasileiro and ASX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, ASX 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 ASX will offset losses from the drop in ASX's long position.Petroleo Brasileiro vs. Ecopetrol SA ADR | Petroleo Brasileiro vs. Equinor ASA ADR | Petroleo Brasileiro vs. Eni SpA ADR | Petroleo Brasileiro vs. Cenovus Energy |
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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.
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