Correlation Between Petroleo Brasileiro and SP 500

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Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and SP 500 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 SP 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Petroleo Brasileiro SA and SP 500 EW, you can compare the effects of market volatilities on Petroleo Brasileiro and SP 500 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 SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and SP 500.

Diversification Opportunities for Petroleo Brasileiro and SP 500

-0.31
  Correlation Coefficient

Very good diversification

The 3 months correlation between Petroleo and SP 500 is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro SA and SP 500 EW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 EW 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 SA are associated (or correlated) with SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 EW has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and SP 500 go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and SP 500

Considering the 90-day investment horizon Petroleo Brasileiro SA is expected to under-perform the SP 500. In addition to that, Petroleo Brasileiro is 1.86 times more volatile than SP 500 EW. It trades about -0.23 of its total potential returns per unit of risk. SP 500 EW is currently generating about 0.16 per unit of volatility. If you would invest  14,018  in SP 500 EW on August 29, 2022 and sell it today you would earn a total of  732.00  from holding SP 500 EW or generate 5.22% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.45%
ValuesDaily Returns

Petroleo Brasileiro SA  vs.  SP 500 EW

 Performance (%) 
       Timeline  
Petroleo Brasileiro 
Petroleo Performance
0 of 100
Over the last 90 days Petroleo Brasileiro SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in December 2022. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Petroleo Price Channel

SP 500 EW 
SP 500 Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in SP 500 EW are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, SP 500 is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the insiders.

SP 500 Price Channel

Petroleo Brasileiro and SP 500 Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Petroleo Brasileiro and SP 500

The main advantage of trading using opposite Petroleo Brasileiro and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.
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The idea behind Petroleo Brasileiro SA and SP 500 EW 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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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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