Correlation Between Petroleo Brasileiro and SPDR Portfolio

Specify exactly 2 symbols:
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

-0.13
  Correlation Coefficient

Good diversification

The 3 months correlation between Petroleo and SPDR Portfolio is -0.13. 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 1.96 times more return on investment than SPDR Portfolio. However, Petroleo Brasileiro is 1.96 times more volatile than SPDR Portfolio SP. It trades about 0.06 of its potential returns per unit of risk. SPDR Portfolio SP is currently generating about 0.01 per unit of risk. If you would invest  539.00  in Petroleo Brasileiro Petrobras on September 10, 2022 and sell it today you would earn a total of  539.00  from holding Petroleo Brasileiro Petrobras or generate 100.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Petroleo Brasileiro Petrobras  vs.  SPDR Portfolio SP

 Performance (%) 
       Timeline  
Petroleo Brasileiro 
Petroleo Performance
0 of 100
Over the last 90 days Petroleo Brasileiro Petrobras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's fundamental drivers remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Petroleo Price Channel

SPDR Portfolio SP 
SPDR Portfolio Performance
0 of 100
Over the last 90 days SPDR Portfolio SP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

SPDR Portfolio Price Channel

Petroleo Brasileiro and SPDR Portfolio Volatility Contrast

   Predicted Return Density   
       Returns  

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.
Petroleo Brasileiro vs. Fevertree Drinks Plc
Petroleo Brasileiro vs. Arca Continental SAB
Petroleo Brasileiro vs. Coca-Cola Femsa SAB
Petroleo Brasileiro vs. Coca-Cola European Partners
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.
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against SPDR Portfolio as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. SPDR Portfolio's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, SPDR Portfolio's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to SPDR Portfolio SP.
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

Other Complementary Tools

Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Go
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Go
Portfolio Rebalancing
Analyze risk-adjusted returns against different time horizons to find asset-allocation targets
Go
Commodity Channel Index
Use Commodity Channel Index to analyze current equity momentum
Go
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Go
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Go