Correlation Between Petroleo Brasileiro and Telia Company

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

Diversification Opportunities for Petroleo Brasileiro and Telia Company

-0.14

Correlation Coefficient

Petroleo Brasileiro  Telia Company

Good diversification

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

Pair Corralation between Petroleo Brasileiro and Telia Company

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.14 times more return on investment than Telia Company. However, Petroleo Brasileiro is 1.14 times more volatile than Telia Company AB. It trades about 0.07 of its potential returns per unit of risk. Telia Company AB is currently generating about -0.29 per unit of risk. If you would invest  765.00  in Petroleo Brasileiro Petrobras on October 14, 2024 and sell it today you would earn a total of  583.00  from holding Petroleo Brasileiro Petrobras or generate 76.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	3.02%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Telia Company AB

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.

Telia Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Telia Company AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Telia Company 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 Telia Company

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

The idea behind Petroleo Brasileiro Petrobras and Telia Company AB 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.