Correlation Between Petroleo Brasileiro and Exxon

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

Diversification Opportunities for Petroleo Brasileiro and Exxon

-0.51

Correlation Coefficient

Petroleo Brasileiro  Exxon

Excellent diversification

The 3 months correlation between Petroleo and Exxon is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp 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 Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Exxon go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Exxon

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 1.99 times less return on investment than Exxon. In addition to that, Petroleo Brasileiro is 2.73 times more volatile than Exxon Mobil Corp. It trades about 0.06 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.34 per unit of volatility. If you would invest  10,436  in Exxon Mobil Corp on February 1, 2024 and sell it today you would earn a total of  1,391  from holding Exxon Mobil Corp or generate 13.33% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Exxon Mobil Corp

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

Insignificant

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.

Exxon Mobil Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Exxon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Exxon

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

The idea behind Petroleo Brasileiro Petrobras and Exxon Mobil Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.