Correlation Between Permianville Royalty and Petroleo Brasileiro

Can any of the company-specific risk be diversified away by investing in both Permianville Royalty and Petroleo Brasileiro 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 Permianville Royalty and Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Permianville Royalty Trust and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Permianville Royalty and Petroleo Brasileiro 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 Permianville Royalty with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permianville Royalty and Petroleo Brasileiro.

Diversification Opportunities for Permianville Royalty and Petroleo Brasileiro

-0.15

Correlation Coefficient

Permianville Royalty  Petroleo Brasileiro

Good diversification

The 3 months correlation between Permianville and Petroleo is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Permianville Royalty Trust and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Permianville Royalty 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 Permianville Royalty Trust are associated (or correlated) with Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of Permianville Royalty i.e., Permianville Royalty and Petroleo Brasileiro go up and down completely randomly.

Pair Corralation between Permianville Royalty and Petroleo Brasileiro

Considering the 90-day investment horizon Permianville Royalty Trust is expected to generate 1.13 times more return on investment than Petroleo Brasileiro. However, Permianville Royalty is 1.13 times more volatile than Petroleo Brasileiro Petrobras. It trades about 0.13 of its potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about 0.12 per unit of risk. If you would invest  136.00  in Permianville Royalty Trust on December 31, 2024 and sell it today you would earn a total of  20.00  from holding Permianville Royalty Trust or generate 14.71% return on investment over 90 days.

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

Permianville Royalty Trust  vs.  Petroleo Brasileiro Petrobras

Permianville Royalty

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Permianville Royalty Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Permianville Royalty disclosed solid returns over the last few months and may actually be approaching a breakup point.

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 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Petroleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Permianville Royalty and Petroleo Brasileiro

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

The idea behind Permianville Royalty Trust and Petroleo Brasileiro Petrobras 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.