Correlation Between Petrleo Brasileiro and Nippon Telegraph
Can any of the company-specific risk be diversified away by investing in both Petrleo Brasileiro and Nippon Telegraph 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 Nippon Telegraph 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 Nippon Telegraph Telephone, you can compare the effects of market volatilities on Petrleo Brasileiro and Nippon Telegraph 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 Nippon Telegraph. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petrleo Brasileiro and Nippon Telegraph.
Diversification Opportunities for Petrleo Brasileiro and Nippon Telegraph
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Petrleo and Nippon is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Nippon Telegraph Telephone in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Telegraph Tel 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 Nippon Telegraph. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Telegraph Tel has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Nippon Telegraph go up and down completely randomly.
Pair Corralation between Petrleo Brasileiro and Nippon Telegraph
Assuming the 90 days trading horizon Petrleo Brasileiro SA is expected to generate 1.0 times more return on investment than Nippon Telegraph. However, Petrleo Brasileiro is 1.0 times more volatile than Nippon Telegraph Telephone. It trades about -0.02 of its potential returns per unit of risk. Nippon Telegraph Telephone is currently generating about -0.07 per unit of risk. If you would invest 4,269 in Petrleo Brasileiro SA on January 25, 2024 and sell it today you would lose (127.00) from holding Petrleo Brasileiro SA or give up 2.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Petrleo Brasileiro SA vs. Nippon Telegraph Telephone
Performance |
| Timeline |
| Petrleo Brasileiro |
| Nippon Telegraph Tel |
Petrleo Brasileiro and Nippon Telegraph Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petrleo Brasileiro and Nippon Telegraph
The main advantage of trading using opposite Petrleo Brasileiro and Nippon Telegraph positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petrleo Brasileiro position performs unexpectedly, Nippon Telegraph 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 Nippon Telegraph will offset losses from the drop in Nippon Telegraph's long position.| Petrleo Brasileiro vs. Vale SA | Petrleo Brasileiro vs. Banco do Brasil | Petrleo Brasileiro vs. Banco Bradesco SA | Petrleo Brasileiro vs. Ita Unibanco Holding |
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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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