Correlation Between National Fuel and Petroleo Brasileiro

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

By analyzing existing cross correlation between National Fuel Gas and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on National Fuel and Petroleo 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 National Fuel with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Fuel and Petroleo Brasileiro.

Diversification Opportunities for National Fuel and Petroleo Brasileiro

0.09

Correlation Coefficient

National Fuel  Petroleo Brasileiro

Significant diversification

The 3 months correlation between National and Petroleo is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding National Fuel Gas and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and National Fuel 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 National Fuel Gas are associated (or correlated) with Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of National Fuel i.e., National Fuel and Petroleo Brasileiro go up and down completely randomly.

Pair Corralation between National Fuel and Petroleo Brasileiro

Considering the 90-day investment horizon National Fuel Gas is expected to generate 0.65 times more return on investment than Petroleo Brasileiro. However, National Fuel Gas is 1.53 times less risky than Petroleo Brasileiro. It trades about 0.4 of its potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about 0.13 per unit of risk. If you would invest  6,044  in National Fuel Gas on December 29, 2024 and sell it today you would earn a total of  1,836  from holding National Fuel Gas or generate 30.38% return on investment over 90 days.

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

National Fuel Gas  vs.  Petroleo Brasileiro Petrobras

National Fuel Gas

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in National Fuel Gas are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, National Fuel reported solid returns over the last few months and may actually be approaching a breakup point.

Petroleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Petroleo Brasileiro reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with National Fuel and Petroleo Brasileiro

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

The idea behind National Fuel Gas and Petroleo Brasileiro Petrobras 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 Anywhere module to track or share privately all of your investments from the convenience of any device.