Correlation Between Petrleo Brasileiro and Transocean

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Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and Transocean 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 Petrleo Brasileiro and Transocean into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petrleo Brasileiro SA and Transocean, you can compare the effects of market volatilities on Petrleo Brasileiro and Transocean 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 Petrleo Brasileiro with a short position of Transocean. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and Transocean.

Diversification Opportunities for Petrleo Brasileiro and Transocean

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Petrleo and Transocean is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean and Petrleo 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 Petrleo Brasileiro SA are associated (or correlated) with Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Transocean go up and down completely randomly.

Pair Corralation between Petrleo Brasileiro and Transocean

Assuming the 90 days trading horizon Petrleo Brasileiro is expected to generate 3.71 times less return on investment than Transocean. But when comparing it to its historical volatility, Petrleo Brasileiro SA is 2.54 times less risky than Transocean. It trades about 0.07 of its potential returns per unit of risk. Transocean is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,225  in Transocean on April 23, 2025 and sell it today you would earn a total of  260.00  from holding Transocean or generate 21.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.41%
ValuesDaily Returns

Petrleo Brasileiro SA  vs.  Transocean

 Performance 
       Timeline  
Petrleo Brasileiro 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Petrleo Brasileiro SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Petrleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in August 2025.
Transocean 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak technical and fundamental indicators, Transocean sustained solid returns over the last few months and may actually be approaching a breakup point.

Petrleo Brasileiro and Transocean Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Petrleo Brasileiro and Transocean

The main advantage of trading using opposite Petrleo Brasileiro and Transocean positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrleo Brasileiro position performs unexpectedly, Transocean 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 Transocean will offset losses from the drop in Transocean's long position.
The idea behind Petrleo Brasileiro SA and Transocean 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.
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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