Correlation Between Petroleo Brasileiro and IShares AEX

Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and IShares AEX 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 IShares AEX 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 iShares AEX UCITS, you can compare the effects of market volatilities on Petroleo Brasileiro and IShares AEX 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 IShares AEX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and IShares AEX.

Diversification Opportunities for Petroleo Brasileiro and IShares AEX

0.61

Correlation Coefficient

Petroleo Brasileiro  IShares AEX

Poor diversification

The 3 months correlation between Petroleo and IShares is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and iShares AEX UCITS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares AEX UCITS 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 IShares AEX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares AEX UCITS has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and IShares AEX go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and IShares AEX

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the IShares AEX. In addition to that, Petroleo Brasileiro is 2.26 times more volatile than iShares AEX UCITS. It trades about -0.06 of its total potential returns per unit of risk. iShares AEX UCITS is currently generating about -0.09 per unit of volatility. If you would invest  9,152  in iShares AEX UCITS on September 27, 2024 and sell it today you would lose (412.00) from holding iShares AEX UCITS or give up 4.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  iShares AEX UCITS

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petroleo Brasileiro Petrobras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

iShares AEX UCITS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares AEX UCITS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, IShares AEX is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Petroleo Brasileiro and IShares AEX

The main advantage of trading using opposite Petroleo Brasileiro and IShares AEX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, IShares AEX 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 IShares AEX will offset losses from the drop in IShares AEX's long position.

The idea behind Petroleo Brasileiro Petrobras and iShares AEX UCITS 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.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.