Correlation Between Capital One and Petrleo Brasileiro

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

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

Diversification Opportunities for Capital One and Petrleo Brasileiro

0.54

Correlation Coefficient

Capital One  Petrleo Brasileiro

Very weak diversification

The 3 months correlation between Capital and Petrleo is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Capital One Financial and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrleo Brasileiro and Capital One 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 Capital One Financial are associated (or correlated) with Petrleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrleo Brasileiro has no effect on the direction of Capital One i.e., Capital One and Petrleo Brasileiro go up and down completely randomly.

Pair Corralation between Capital One and Petrleo Brasileiro

Assuming the 90 days trading horizon Capital One Financial is expected to under-perform the Petrleo Brasileiro. In addition to that, Capital One is 1.17 times more volatile than Petrleo Brasileiro SA. It trades about -0.04 of its total potential returns per unit of risk. Petrleo Brasileiro SA is currently generating about 0.09 per unit of volatility. If you would invest  25,816  in Petrleo Brasileiro SA on December 24, 2024 and sell it today you would earn a total of  2,484  from holding Petrleo Brasileiro SA or generate 9.62% return on investment over 90 days.

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

Capital One Financial  vs.  Petrleo Brasileiro SA

Capital One Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital One Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Capital One is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Petrleo Brasileiro

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petrleo Brasileiro SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Petrleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Capital One and Petrleo Brasileiro

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

The idea behind Capital One Financial and Petrleo Brasileiro 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.