Correlation Between Petroleo Brasileiro and WisdomTree Equity

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

Diversification Opportunities for Petroleo Brasileiro and WisdomTree Equity

0.0

Correlation Coefficient

Petroleo Brasileiro  WisdomTree Equity

Pay attention - limited upside

The 3 months correlation between Petroleo and WisdomTree is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and WisdomTree Equity Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Equity Income 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 WisdomTree Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Equity Income has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and WisdomTree Equity go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and WisdomTree Equity

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 2.55 times more return on investment than WisdomTree Equity. However, Petroleo Brasileiro is 2.55 times more volatile than WisdomTree Equity Income. It trades about 0.07 of its potential returns per unit of risk. WisdomTree Equity Income is currently generating about -0.04 per unit of risk. If you would invest  1,296  in Petroleo Brasileiro Petrobras on October 20, 2024 and sell it today you would earn a total of  76.00  from holding Petroleo Brasileiro Petrobras or generate 5.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.16%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  WisdomTree Equity Income

Petroleo Brasileiro

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Petroleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in February 2025.

WisdomTree Equity Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WisdomTree Equity Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, WisdomTree Equity is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Petroleo Brasileiro and WisdomTree Equity

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

The idea behind Petroleo Brasileiro Petrobras and WisdomTree Equity Income 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.