Correlation Between Petroleo Brasileiro and Vietnam National

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

Diversification Opportunities for Petroleo Brasileiro and Vietnam National

0.51

Correlation Coefficient

Petroleo Brasileiro  Vietnam National

Very weak diversification

The 3 months correlation between Petroleo and Vietnam is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Vietnam National Reinsurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vietnam National Rei 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 Vietnam National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vietnam National Rei has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Vietnam National go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Vietnam National

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Vietnam National. In addition to that, Petroleo Brasileiro is 1.89 times more volatile than Vietnam National Reinsurance. It trades about -0.04 of its total potential returns per unit of risk. Vietnam National Reinsurance is currently generating about -0.02 per unit of volatility. If you would invest  2,190,909  in Vietnam National Reinsurance on September 16, 2024 and sell it today you would lose (30,909) from holding Vietnam National Reinsurance or give up 1.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Vietnam National Reinsurance

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.

Vietnam National Rei

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vietnam National Reinsurance has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Vietnam National is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and Vietnam National

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

The idea behind Petroleo Brasileiro Petrobras and Vietnam National Reinsurance 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.