Correlation Between Petrleo Brasileiro and IShares Global

Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and IShares Global 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 Petrleo Brasileiro and IShares Global into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Petrleo Brasileiro SA and iShares Global Timber, you can compare the effects of market volatilities on Petrleo Brasileiro and IShares Global 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 Petrleo Brasileiro with a short position of IShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and IShares Global.

Diversification Opportunities for Petrleo Brasileiro and IShares Global

-0.34

Correlation Coefficient

Petrleo Brasileiro  IShares Global

Very good diversification

The 3 months correlation between Petrleo and IShares is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and iShares Global Timber in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Global Timber and Petrleo 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 Petrleo Brasileiro SA are associated (or correlated) with IShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Global Timber has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and IShares Global go up and down completely randomly.

Pair Corralation between Petrleo Brasileiro and IShares Global

Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to under-perform the IShares Global. In addition to that, Petrleo Brasileiro is 32.75 times more volatile than iShares Global Timber. It trades about -0.02 of its total potential returns per unit of risk. iShares Global Timber is currently generating about 0.13 per unit of volatility. If you would invest  177,917  in iShares Global Timber on September 28, 2024 and sell it today you would earn a total of  680.00  from holding iShares Global Timber or generate 0.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Petrleo Brasileiro SA  vs.  iShares Global Timber

Petrleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrleo Brasileiro SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Petrleo Brasileiro is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

iShares Global Timber

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Global Timber are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, IShares Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petrleo Brasileiro and IShares Global

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

The idea behind Petrleo Brasileiro SA and iShares Global Timber 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 Transaction History module to view history of all your transactions and understand their impact on performance.