Correlation Between Petroleo Brasileiro and Aberdeen New

Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Aberdeen New 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 Aberdeen New 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 Aberdeen New India, you can compare the effects of market volatilities on Petroleo Brasileiro and Aberdeen New 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 Aberdeen New. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Aberdeen New.

Diversification Opportunities for Petroleo Brasileiro and Aberdeen New

0.71

Correlation Coefficient

Petroleo Brasileiro  Aberdeen New

Poor diversification

The 3 months correlation between Petroleo and Aberdeen is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Aberdeen New India in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen New India 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 Aberdeen New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen New India has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Aberdeen New go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Aberdeen New

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.56 times more return on investment than Aberdeen New. However, Petroleo Brasileiro is 1.56 times more volatile than Aberdeen New India. It trades about 0.02 of its potential returns per unit of risk. Aberdeen New India is currently generating about 0.02 per unit of risk. If you would invest  1,444  in Petroleo Brasileiro Petrobras on September 12, 2024 and sell it today you would earn a total of  15.50  from holding Petroleo Brasileiro Petrobras or generate 1.07% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Aberdeen New India

Petroleo Brasileiro

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Petroleo Brasileiro is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Aberdeen New India

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aberdeen New India are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Aberdeen New is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Petroleo Brasileiro and Aberdeen New

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

The idea behind Petroleo Brasileiro Petrobras and Aberdeen New India 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.