Correlation Between Petroleo Brasileiro and Frost Total
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and Frost Total 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 Frost Total 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 Frost Total Return, you can compare the effects of market volatilities on Petroleo Brasileiro and Frost Total 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 Frost Total. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and Frost Total.
Diversification Opportunities for Petroleo Brasileiro and Frost Total
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Petroleo and Frost is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Frost Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frost Total Return 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 Frost Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frost Total Return has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Frost Total go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and Frost Total
Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 7.21 times more return on investment than Frost Total. However, Petroleo Brasileiro is 7.21 times more volatile than Frost Total Return. It trades about 0.13 of its potential returns per unit of risk. Frost Total Return is currently generating about 0.13 per unit of risk. If you would invest 1,275 in Petroleo Brasileiro Petrobras on December 28, 2024 and sell it today you would earn a total of 164.00 from holding Petroleo Brasileiro Petrobras or generate 12.86% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. Frost Total Return
Performance |
Timeline |
Petroleo Brasileiro |
Frost Total Return |
Petroleo Brasileiro and Frost Total Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Petroleo Brasileiro and Frost Total
The main advantage of trading using opposite Petroleo Brasileiro and Frost Total positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, Frost Total 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 Frost Total will offset losses from the drop in Frost Total's long position.Petroleo Brasileiro vs. BP PLC ADR | Petroleo Brasileiro vs. Shell PLC ADR | Petroleo Brasileiro vs. Suncor Energy | Petroleo Brasileiro vs. Imperial Oil |
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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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