Correlation Between Imperial Oil and Petroleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Imperial Oil 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 Imperial Oil and Petroleo 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 Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Imperial Oil 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 Imperial Oil with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Oil and Petroleo Brasileiro.
Diversification Opportunities for Imperial Oil and Petroleo Brasileiro
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Imperial and Petroleo is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Oil and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo 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 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 Imperial Oil i.e., Imperial Oil and Petroleo Brasileiro go up and down completely randomly.
Pair Corralation between Imperial Oil and Petroleo Brasileiro
Considering the 90-day investment horizon Imperial Oil is expected to under-perform the Petroleo Brasileiro. But the stock apears to be less risky and, when comparing its historical volatility, Imperial Oil is 1.2 times less risky than Petroleo Brasileiro. The stock trades about -0.12 of its potential returns per unit of risk. The Petroleo Brasileiro Petrobras is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,526 in Petroleo Brasileiro Petrobras on February 6, 2024 and sell it today you would earn a total of 145.00 from holding Petroleo Brasileiro Petrobras or generate 9.5% 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. Petroleo Brasileiro Petrobras
Performance |
Timeline |
Imperial Oil |
Petroleo Brasileiro |
Imperial Oil and Petroleo Brasileiro Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Imperial Oil and Petroleo Brasileiro
The main advantage of trading using opposite Imperial Oil and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Oil 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.Imperial Oil vs. Aquagold International | Imperial Oil vs. Morningstar Unconstrained Allocation | Imperial Oil vs. Thrivent High Yield | Imperial Oil vs. Via Renewables |
Petroleo Brasileiro vs. Aquagold International | Petroleo Brasileiro vs. Morningstar Unconstrained Allocation | Petroleo Brasileiro vs. Thrivent High Yield | Petroleo Brasileiro vs. Via Renewables |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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