Correlation Between Petroleo Brasileiro and VVC Exploration

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

Diversification Opportunities for Petroleo Brasileiro and VVC Exploration

-0.02

Correlation Coefficient

Petroleo Brasileiro  VVC Exploration

Good diversification

The 3 months correlation between Petroleo and VVC is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and VVC Exploration Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VVC Exploration Corp 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 VVC Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VVC Exploration Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and VVC Exploration go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and VVC Exploration

If you would invest  3.00  in VVC Exploration Corp on September 21, 2024 and sell it today you would earn a total of  0.00  from holding VVC Exploration Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  VVC Exploration Corp

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.

VVC Exploration Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in VVC Exploration Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, VVC Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and VVC Exploration

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

The idea behind Petroleo Brasileiro Petrobras and VVC Exploration Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.