Correlation Between Petroleo Brasileiro and Vanguard USD

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

Diversification Opportunities for Petroleo Brasileiro and Vanguard USD

0.64

Correlation Coefficient

Petroleo Brasileiro  Vanguard USD

Poor diversification

The 3 months correlation between Petroleo and Vanguard is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Vanguard USD Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard USD Corporate 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 Vanguard USD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard USD Corporate has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Vanguard USD go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Vanguard USD

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 7.29 times more return on investment than Vanguard USD. However, Petroleo Brasileiro is 7.29 times more volatile than Vanguard USD Corporate. It trades about 0.09 of its potential returns per unit of risk. Vanguard USD Corporate is currently generating about 0.24 per unit of risk. If you would invest  1,372  in Petroleo Brasileiro Petrobras on September 13, 2024 and sell it today you would earn a total of  48.00  from holding Petroleo Brasileiro Petrobras or generate 3.5% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Vanguard USD Corporate

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Vanguard USD Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard USD Corporate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vanguard USD is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Petroleo Brasileiro and Vanguard USD

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

The idea behind Petroleo Brasileiro Petrobras and Vanguard USD Corporate 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.