Correlation Between Petroleo Brasileiro and IncomeShares NVIDIA

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

Diversification Opportunities for Petroleo Brasileiro and IncomeShares NVIDIA

-0.49

Correlation Coefficient

Petroleo Brasileiro  IncomeShares NVIDIA

Very good diversification

The 3 months correlation between Petroleo and IncomeShares is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and IncomeShares NVIDIA NVDA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IncomeShares NVIDIA NVDA 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 IncomeShares NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IncomeShares NVIDIA NVDA has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and IncomeShares NVIDIA go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and IncomeShares NVIDIA

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.84 times more return on investment than IncomeShares NVIDIA. However, Petroleo Brasileiro Petrobras is 1.19 times less risky than IncomeShares NVIDIA. It trades about 0.07 of its potential returns per unit of risk. IncomeShares NVIDIA NVDA is currently generating about -0.02 per unit of risk. If you would invest  668.00  in Petroleo Brasileiro Petrobras on September 30, 2024 and sell it today you would earn a total of  593.00  from holding Petroleo Brasileiro Petrobras or generate 88.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	22.54%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  IncomeShares NVIDIA NVDA

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 relatively invariable fundamental drivers, Petroleo Brasileiro is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

IncomeShares NVIDIA NVDA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IncomeShares NVIDIA NVDA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, IncomeShares NVIDIA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petroleo Brasileiro and IncomeShares NVIDIA

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

The idea behind Petroleo Brasileiro Petrobras and IncomeShares NVIDIA NVDA 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.

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 Global Correlations module to find global opportunities by holding instruments from different markets.