Correlation Between Petroleo Brasileiro and China Ecotek
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and China Ecotek 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 China Ecotek 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 China Ecotek Corp, you can compare the effects of market volatilities on Petroleo Brasileiro and China Ecotek 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 China Ecotek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and China Ecotek.
Diversification Opportunities for Petroleo Brasileiro and China Ecotek
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Petroleo and China is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and China Ecotek Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Ecotek Corp 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 China Ecotek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Ecotek Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and China Ecotek go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and China Ecotek
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.05 times more return on investment than China Ecotek. However, Petroleo Brasileiro is 1.05 times more volatile than China Ecotek Corp. It trades about 0.05 of its potential returns per unit of risk. China Ecotek Corp is currently generating about -0.05 per unit of risk. If you would invest 1,265 in Petroleo Brasileiro Petrobras on September 15, 2024 and sell it today you would earn a total of 108.00 from holding Petroleo Brasileiro Petrobras or generate 8.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 97.67% |
Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. China Ecotek Corp
Performance |
Timeline |
Petroleo Brasileiro |
China Ecotek Corp |
Petroleo Brasileiro and China Ecotek Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Petroleo Brasileiro and China Ecotek
The main advantage of trading using opposite Petroleo Brasileiro and China Ecotek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, China Ecotek 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 China Ecotek will offset losses from the drop in China Ecotek's long position.Petroleo Brasileiro vs. Ecopetrol SA ADR | Petroleo Brasileiro vs. Equinor ASA ADR | Petroleo Brasileiro vs. Eni SpA ADR | Petroleo Brasileiro vs. Cenovus Energy |
China Ecotek vs. Wan Hai Lines | China Ecotek vs. U Ming Marine Transport | China Ecotek vs. China Airlines |
Check out your portfolio center.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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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