Correlation Between Vale SA and Petrleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Vale SA and Petrleo 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 Vale SA and Petrleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Petrleo Brasileiro SA, you can compare the effects of market volatilities on Vale SA and Petrleo 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 Vale SA with a short position of Petrleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Petrleo Brasileiro.
Diversification Opportunities for Vale SA and Petrleo Brasileiro
0.71 | Correlation Coefficient |
Poor diversification
The @@bw1eo months correlation between Vale and Petrleo is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrleo Brasileiro and Vale SA 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 Vale SA are associated (or correlated) with Petrleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrleo Brasileiro has no effect on the direction of Vale SA i.e., Vale SA and Petrleo Brasileiro go up and down completely randomly.
Pair Corralation between Vale SA and Petrleo Brasileiro
Assuming the 90 days trading horizon Vale SA is expected to generate 3.37 times less return on investment than Petrleo Brasileiro. But when comparing it to its historical volatility, Vale SA is 1.12 times less risky than Petrleo Brasileiro. It trades about 0.14 of its potential returns per unit of risk. Petrleo Brasileiro SA is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest 3,580 in Petrleo Brasileiro SA on February 3, 2024 and sell it today you would earn a total of 638.00 from holding Petrleo Brasileiro SA or generate 17.82% return on investment over 90 days.
Time Period | @@bw1EO Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Vale SA vs. Petrleo Brasileiro SA
Performance |
Timeline |
Vale SA |
Petrleo Brasileiro |
Vale SA and Petrleo Brasileiro Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vale SA and Petrleo Brasileiro
The main advantage of trading using opposite Vale SA and Petrleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Petrleo 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 Petrleo Brasileiro will offset losses from the drop in Petrleo Brasileiro's long position.Vale SA vs. Toyota Motor | Vale SA vs. Sony Group | Vale SA vs. Honda Motor Co | Vale SA vs. Taiwan Semiconductor Manufacturing |
Petrleo Brasileiro vs. Vale SA | Petrleo Brasileiro vs. Banco do Brasil | Petrleo Brasileiro vs. Banco Bradesco SA | Petrleo Brasileiro vs. Ita Unibanco Holding |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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