Correlation Between Adams Resources and Petroleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Adams Resources 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 Adams Resources and Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adams Resources Energy and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Adams Resources 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 Adams Resources with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adams Resources and Petroleo Brasileiro.
Diversification Opportunities for Adams Resources and Petroleo Brasileiro
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Adams and Petroleo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Adams Resources Energy and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and Adams Resources 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 Adams Resources Energy 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 Adams Resources i.e., Adams Resources and Petroleo Brasileiro go up and down completely randomly.
Pair Corralation between Adams Resources and Petroleo Brasileiro
Allowing for the 90-day total investment horizon Adams Resources is expected to generate 1.08 times less return on investment than Petroleo Brasileiro. In addition to that, Adams Resources is 1.34 times more volatile than Petroleo Brasileiro Petrobras. It trades about 0.26 of its total potential returns per unit of risk. Petroleo Brasileiro Petrobras is currently generating about 0.38 per unit of volatility. If you would invest 1,474 in Petroleo Brasileiro Petrobras on January 26, 2024 and sell it today you would earn a total of 207.00 from holding Petroleo Brasileiro Petrobras or generate 14.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adams Resources Energy vs. Petroleo Brasileiro Petrobras
Performance |
| Timeline |
| Adams Resources Energy |
| Petroleo Brasileiro |
Adams Resources and Petroleo Brasileiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adams Resources and Petroleo Brasileiro
The main advantage of trading using opposite Adams Resources and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adams Resources 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.| Adams Resources vs. Delek Energy | Adams Resources vs. Sunoco LP | Adams Resources vs. CVR Energy | Adams Resources vs. Phillips 66 |
| Petroleo Brasileiro vs. Ecopetrol SA ADR | Petroleo Brasileiro vs. Equinor ASA ADR | Petroleo Brasileiro vs. Eni SpA ADR | Petroleo Brasileiro vs. Cenovus Energy |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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