Correlation Between Petroleo Brasileiro and Walt Disney

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

Diversification Opportunities for Petroleo Brasileiro and Walt Disney

-0.17

Correlation Coefficient

Petroleo Brasileiro  Walt Disney

Good diversification

The 3 months correlation between Petroleo and Walt is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and The Walt Disney in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walt Disney 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 Walt Disney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walt Disney has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Walt Disney go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Walt Disney

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Walt Disney. In addition to that, Petroleo Brasileiro is 1.06 times more volatile than The Walt Disney. It trades about -0.01 of its total potential returns per unit of risk. The Walt Disney is currently generating about 0.08 per unit of volatility. If you would invest  9,113  in The Walt Disney on September 29, 2024 and sell it today you would earn a total of  1,537  from holding The Walt Disney or generate 16.87% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  The Walt Disney

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.

Walt Disney

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Walt Disney are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Walt Disney unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Walt Disney

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

The idea behind Petroleo Brasileiro Petrobras and The Walt Disney 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .