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
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Imperial and Petróleo is -0.59. 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 2.72 times less return on investment than Petróleo Brasileiro. But when comparing it to its historical volatility, Imperial Oil is 1.25 times less risky than Petróleo Brasileiro. It trades about 0.06 of its potential returns per unit of risk. Petrleo Brasileiro SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 808.00 in Petrleo Brasileiro SA on February 7, 2024 and sell it today you would earn a total of 758.00 from holding Petrleo Brasileiro SA or generate 93.81% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Imperial Oil vs. Petrleo Brasileiro SA
Performance |
Timeline |
Imperial Oil |
Petróleo Brasileiro |
Imperial Oil and Petróleo Brasileiro Volatility Contrast
Predicted Return Density |
Returns |
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.Imperial Oil vs. Aquagold International | Imperial Oil vs. Morningstar Unconstrained Allocation | Imperial Oil vs. Thrivent High Yield | Imperial Oil vs. Via Renewables |
Petróleo Brasileiro vs. Exxon Mobil Corp | Petróleo Brasileiro vs. Chevron Corp | Petróleo Brasileiro vs. TotalEnergies SE ADR | Petróleo Brasileiro vs. Petroleo Brasileiro Petrobras |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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