Correlation Between Ameriprise Financial and Petro Rio

Can any of the company-specific risk be diversified away by investing in both Ameriprise Financial and Petro Rio 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 Ameriprise Financial and Petro Rio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ameriprise Financial and Petro Rio SA, you can compare the effects of market volatilities on Ameriprise Financial and Petro Rio 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 Ameriprise Financial with a short position of Petro Rio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameriprise Financial and Petro Rio.

Diversification Opportunities for Ameriprise Financial and Petro Rio

0.47

Correlation Coefficient

Ameriprise Financial  Petro Rio

Very weak diversification

The 3 months correlation between Ameriprise and Petro is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and Petro Rio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Rio SA and Ameriprise Financial 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 Ameriprise Financial are associated (or correlated) with Petro Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Rio SA has no effect on the direction of Ameriprise Financial i.e., Ameriprise Financial and Petro Rio go up and down completely randomly.

Pair Corralation between Ameriprise Financial and Petro Rio

Assuming the 90 days trading horizon Ameriprise Financial is expected to generate 0.91 times more return on investment than Petro Rio. However, Ameriprise Financial is 1.1 times less risky than Petro Rio. It trades about -0.07 of its potential returns per unit of risk. Petro Rio SA is currently generating about -0.08 per unit of risk. If you would invest  81,352  in Ameriprise Financial on December 2, 2024 and sell it today you would lose (3,545) from holding Ameriprise Financial or give up 4.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.02%
Values	Daily Returns

Ameriprise Financial  vs.  Petro Rio SA

Ameriprise Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ameriprise Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Petro Rio SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petro Rio SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Petro Rio is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ameriprise Financial and Petro Rio

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

The idea behind Ameriprise Financial and Petro Rio SA 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.