Correlation Between PetroChina and Petrleo Brasileiro

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

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

Diversification Opportunities for PetroChina and Petrleo Brasileiro

0.0

Correlation Coefficient

PetroChina  Petrleo Brasileiro

Pay attention - limited upside

The 3 months correlation between PetroChina and Petrleo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrleo Brasileiro and PetroChina 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 PetroChina Co are associated (or correlated) with Petrleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrleo Brasileiro has no effect on the direction of PetroChina i.e., PetroChina and Petrleo Brasileiro go up and down completely randomly.

Pair Corralation between PetroChina and Petrleo Brasileiro

If you would invest  3,539  in Petrleo Brasileiro SA on February 4, 2024 and sell it today you would earn a total of  450.00  from holding Petrleo Brasileiro SA or generate 12.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

PetroChina Co  vs.  Petrleo Brasileiro SA

PetroChina

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PetroChina Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PetroChina is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Petrleo Brasileiro

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Petrleo Brasileiro SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Petrleo Brasileiro is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PetroChina and Petrleo Brasileiro

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

The idea behind PetroChina Co 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.