Correlation Between Petroleo Brasileiro and Ultrashort Latin
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Ultrashort Latin 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 Ultrashort Latin 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 Ultrashort Latin America, you can compare the effects of market volatilities on Petroleo Brasileiro and Ultrashort Latin 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 Ultrashort Latin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Ultrashort Latin.
Diversification Opportunities for Petroleo Brasileiro and Ultrashort Latin
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Petroleo and Ultrashort is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Ultrashort Latin America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort Latin America 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 Ultrashort Latin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort Latin America has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Ultrashort Latin go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Ultrashort Latin
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Ultrashort Latin. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.5 times less risky than Ultrashort Latin. The stock trades about -0.03 of its potential returns per unit of risk. The Ultrashort Latin America is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,520 in Ultrashort Latin America on September 19, 2024 and sell it today you would earn a total of 1,041 from holding Ultrashort Latin America or generate 29.57% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 98.44% |
Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. Ultrashort Latin America
Performance |
Timeline |
Petroleo Brasileiro |
Ultrashort Latin America |
Petroleo Brasileiro and Ultrashort Latin Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Petroleo Brasileiro and Ultrashort Latin
The main advantage of trading using opposite Petroleo Brasileiro and Ultrashort Latin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Ultrashort Latin 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 Ultrashort Latin will offset losses from the drop in Ultrashort Latin'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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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