Correlation Between Petroleo Brasileiro and Whitehaven Coal

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

Diversification Opportunities for Petroleo Brasileiro and Whitehaven Coal

0.24

Correlation Coefficient

Petroleo Brasileiro  Whitehaven Coal

Modest diversification

The 3 months correlation between Petroleo and Whitehaven is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Whitehaven Coal Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Whitehaven Coal

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.19 times more return on investment than Whitehaven Coal. However, Petroleo Brasileiro is 1.19 times more volatile than Whitehaven Coal Limited. It trades about -0.13 of its potential returns per unit of risk. Whitehaven Coal Limited is currently generating about -0.16 per unit of risk. If you would invest  1,368  in Petroleo Brasileiro Petrobras on September 20, 2024 and sell it today you would lose (84.00) from holding Petroleo Brasileiro Petrobras or give up 6.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Whitehaven Coal Limited

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.

Whitehaven Coal

Risk-Adjusted Performance

5 of 100

Insignificant

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

Pair Trading with Petroleo Brasileiro and Whitehaven Coal

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

The idea behind Petroleo Brasileiro Petrobras and Whitehaven Coal Limited 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.