Correlation Between Petroleo Brasileiro and VanEck Circular

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

By analyzing existing cross correlation between Petroleo Brasileiro Petrobras and VanEck Circular Economy, you can compare the effects of market volatilities on Petroleo Brasileiro and VanEck Circular 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 Petroleo Brasileiro with a short position of VanEck Circular. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and VanEck Circular.

Diversification Opportunities for Petroleo Brasileiro and VanEck Circular

-0.21

Correlation Coefficient

Petroleo Brasileiro  VanEck Circular

Very good diversification

The 3 months correlation between Petroleo and VanEck is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and VanEck Circular Economy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Circular Economy and Petroleo 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 Petroleo Brasileiro Petrobras are associated (or correlated) with VanEck Circular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Circular Economy has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and VanEck Circular go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and VanEck Circular

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 2.71 times more return on investment than VanEck Circular. However, Petroleo Brasileiro is 2.71 times more volatile than VanEck Circular Economy. It trades about 0.06 of its potential returns per unit of risk. VanEck Circular Economy is currently generating about -0.03 per unit of risk. If you would invest  1,347  in Petroleo Brasileiro Petrobras on September 15, 2024 and sell it today you would earn a total of  26.00  from holding Petroleo Brasileiro Petrobras or generate 1.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.3%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  VanEck Circular Economy

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

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

VanEck Circular Economy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Circular Economy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, VanEck Circular 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 Petroleo Brasileiro and VanEck Circular

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

The idea behind Petroleo Brasileiro Petrobras and VanEck Circular Economy 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.