Correlation Between Chevron Corp and Petroleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Chevron Corp 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 Chevron Corp and Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Chevron Corp 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 Chevron Corp with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Petroleo Brasileiro.
Diversification Opportunities for Chevron Corp and Petroleo Brasileiro
-0.26 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chevron and Petroleo is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Chevron Corp 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 Chevron Corp 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 Chevron Corp i.e., Chevron Corp and Petroleo Brasileiro go up and down completely randomly.
Pair Corralation between Chevron Corp and Petroleo Brasileiro
Considering the 90-day investment horizon Chevron Corp is expected to generate 4.22 times less return on investment than Petroleo Brasileiro. But when comparing it to its historical volatility, Chevron Corp is 1.67 times less risky than Petroleo Brasileiro. It trades about 0.04 of its potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 660.00 in Petroleo Brasileiro Petrobras on January 25, 2024 and sell it today you would earn a total of 1,021 from holding Petroleo Brasileiro Petrobras or generate 154.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron Corp vs. Petroleo Brasileiro Petrobras
Performance |
| Timeline |
| Chevron Corp |
| Petroleo Brasileiro |
Chevron Corp and Petroleo Brasileiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Petroleo Brasileiro
The main advantage of trading using opposite Chevron Corp and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp 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.| Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. Petroleo Brasileiro Petrobras | Chevron Corp vs. Suncor Energy |
| Petroleo Brasileiro vs. Ecopetrol SA ADR | Petroleo Brasileiro vs. Equinor ASA ADR | Petroleo Brasileiro vs. Eni SpA ADR | Petroleo Brasileiro vs. Cenovus Energy |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine |