Correlation Between Petroleo Brasileiro and ProShares

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

Diversification Opportunities for Petroleo Brasileiro and ProShares

-0.14

Correlation Coefficient

Petroleo Brasileiro  ProShares

Good diversification

The 3 months correlation between Petroleo and ProShares is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and ProShares SP Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares SP Technology 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 ProShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares SP Technology has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and ProShares go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and ProShares

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the ProShares. In addition to that, Petroleo Brasileiro is 2.78 times more volatile than ProShares SP Technology. It trades about -0.1 of its total potential returns per unit of risk. ProShares SP Technology is currently generating about 0.23 per unit of volatility. If you would invest  7,592  in ProShares SP Technology on September 17, 2024 and sell it today you would earn a total of  245.00  from holding ProShares SP Technology or generate 3.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  ProShares SP Technology

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.

ProShares SP Technology

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares SP Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental indicators, ProShares is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Petroleo Brasileiro and ProShares

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

The idea behind Petroleo Brasileiro Petrobras and ProShares SP Technology 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.