Correlation Between Petroleo Brasileiro and SPDR Gold

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

Diversification Opportunities for Petroleo Brasileiro and SPDR Gold

-0.62

Correlation Coefficient

Petroleo Brasileiro  SPDR Gold

Excellent diversification

The 3 months correlation between Petroleo and SPDR is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and SPDR Gold Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Gold Trust 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 SPDR Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Gold Trust has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and SPDR Gold go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and SPDR Gold

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the SPDR Gold. In addition to that, Petroleo Brasileiro is 1.4 times more volatile than SPDR Gold Trust. It trades about -0.01 of its total potential returns per unit of risk. SPDR Gold Trust is currently generating about 0.15 per unit of volatility. If you would invest  393,600  in SPDR Gold Trust on September 30, 2024 and sell it today you would earn a total of  97,279  from holding SPDR Gold Trust or generate 24.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  SPDR Gold Trust

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petroleo Brasileiro Petrobras has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

SPDR Gold Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Gold Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, SPDR Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and SPDR Gold

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

The idea behind Petroleo Brasileiro Petrobras and SPDR Gold Trust 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.