Correlation Between Petroleo Brasileiro and SPDR Portfolio

Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and SPDR Portfolio 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 SPDR Portfolio 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 SPDR Portfolio SP, you can compare the effects of market volatilities on Petroleo Brasileiro and SPDR Portfolio 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 SPDR Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and SPDR Portfolio.

Diversification Opportunities for Petroleo Brasileiro and SPDR Portfolio

-0.54

Correlation Coefficient

Petroleo Brasileiro  SPDR Portfolio

Excellent diversification

The 3 months correlation between Petroleo and SPDR is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and SPDR Portfolio SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio SP 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 SPDR Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio SP has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and SPDR Portfolio go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and SPDR Portfolio

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.63 times more return on investment than SPDR Portfolio. However, Petroleo Brasileiro is 1.63 times more volatile than SPDR Portfolio SP. It trades about 0.38 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about -0.16 per unit of risk. 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	Very Weak
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  SPDR Portfolio SP

Petroleo Brasileiro

Risk-Adjusted Performance

0 of 100

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.

SPDR Portfolio SP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Portfolio SP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SPDR Portfolio is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Petroleo Brasileiro and SPDR Portfolio

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

The idea behind Petroleo Brasileiro Petrobras and SPDR Portfolio SP 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 Global Correlations module to find global opportunities by holding instruments from different markets.