Correlation Between Petroleo Brasileiro and Invesco Dynamic

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

Diversification Opportunities for Petroleo Brasileiro and Invesco Dynamic

0.4

Correlation Coefficient

Petroleo Brasileiro  Invesco Dynamic

Very weak diversification

The 3 months correlation between Petroleo and Invesco is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Invesco Dynamic Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Dynamic Oil 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 Invesco Dynamic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Dynamic Oil has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Invesco Dynamic go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Invesco Dynamic

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.01 times more return on investment than Invesco Dynamic. However, Petroleo Brasileiro is 1.01 times more volatile than Invesco Dynamic Oil. It trades about 0.13 of its potential returns per unit of risk. Invesco Dynamic Oil is currently generating about -0.03 per unit of risk. If you would invest  1,262  in Petroleo Brasileiro Petrobras on December 26, 2024 and sell it today you would earn a total of  165.00  from holding Petroleo Brasileiro Petrobras or generate 13.07% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Invesco Dynamic Oil

Petroleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Petroleo Brasileiro reported solid returns over the last few months and may actually be approaching a breakup point.

Invesco Dynamic Oil

Risk-Adjusted Performance

Very Weak

Over the last 90 days Invesco Dynamic Oil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Invesco Dynamic is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with Petroleo Brasileiro and Invesco Dynamic

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

The idea behind Petroleo Brasileiro Petrobras and Invesco Dynamic Oil 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.