Correlation Between Petroleo Brasileiro and IShares Core

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

Diversification Opportunities for Petroleo Brasileiro and IShares Core

0.2

Correlation Coefficient

Petroleo Brasileiro  IShares Core

Modest diversification

The 3 months correlation between Petroleo and IShares is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI 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 IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core MSCI has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and IShares Core go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and IShares Core

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 1.72 times less return on investment than IShares Core. In addition to that, Petroleo Brasileiro is 1.48 times more volatile than iShares Core MSCI. It trades about 0.02 of its total potential returns per unit of risk. iShares Core MSCI is currently generating about 0.05 per unit of volatility. If you would invest  3,427  in iShares Core MSCI on September 12, 2024 and sell it today you would earn a total of  95.00  from holding iShares Core MSCI or generate 2.77% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  iShares Core MSCI

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.

iShares Core MSCI

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core MSCI are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, IShares Core 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 IShares Core

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

The idea behind Petroleo Brasileiro Petrobras and iShares Core MSCI 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.