Correlation Between Petroleo Brasileiro and Eco Oil

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

Diversification Opportunities for Petroleo Brasileiro and Eco Oil

-0.26

Correlation Coefficient

Petroleo Brasileiro  Eco Oil

Very good diversification

The 3 months correlation between Petroleo and Eco is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Eco Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eco Oil Gas 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 Eco Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eco Oil Gas has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Eco Oil go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Eco Oil

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 10.67 times less return on investment than Eco Oil. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.93 times less risky than Eco Oil. It trades about 0.0 of its potential returns per unit of risk. Eco Oil Gas is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  990.00  in Eco Oil Gas on December 2, 2024 and sell it today you would lose (15.00) from holding Eco Oil Gas or give up 1.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Eco Oil Gas

Petroleo Brasileiro

Risk-Adjusted Performance

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.

Eco Oil Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eco Oil Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Eco Oil is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Petroleo Brasileiro and Eco Oil

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

The idea behind Petroleo Brasileiro Petrobras and Eco Oil Gas 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.