Correlation Between Imperial Oil and Petróleo Brasileiro

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

By analyzing existing cross correlation between Imperial Oil and Petrleo Brasileiro SA, you can compare the effects of market volatilities on Imperial Oil and Petróleo 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 Imperial Oil with a short position of Petróleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Oil and Petróleo Brasileiro.

Diversification Opportunities for Imperial Oil and Petróleo Brasileiro

0.86

Correlation Coefficient

Imperial Oil  Petróleo Brasileiro

Very poor diversification

The 3 months correlation between Imperial and Petróleo is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Oil and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petróleo Brasileiro and Imperial Oil 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 Imperial Oil are associated (or correlated) with Petróleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petróleo Brasileiro has no effect on the direction of Imperial Oil i.e., Imperial Oil and Petróleo Brasileiro go up and down completely randomly.

Pair Corralation between Imperial Oil and Petróleo Brasileiro

Considering the 90-day investment horizon Imperial Oil is expected to generate 0.8 times more return on investment than Petróleo Brasileiro. However, Imperial Oil is 1.26 times less risky than Petróleo Brasileiro. It trades about 0.28 of its potential returns per unit of risk. Petrleo Brasileiro SA is currently generating about 0.13 per unit of risk. If you would invest  6,790  in Imperial Oil on May 6, 2025 and sell it today you would earn a total of  1,645  from holding Imperial Oil or generate 24.23% return on investment over 90 days.

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

Imperial Oil  vs.  Petrleo Brasileiro SA

Imperial Oil

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Imperial Oil are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Imperial Oil displayed solid returns over the last few months and may actually be approaching a breakup point.

Petróleo Brasileiro

Risk-Adjusted Performance

OK

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

Pair Trading with Imperial Oil and Petróleo Brasileiro

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

The idea behind Imperial Oil and Petrleo Brasileiro SA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.