Correlation Between Petroleo Brasileiro and AirAsia X

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

Diversification Opportunities for Petroleo Brasileiro and AirAsia X

-0.37

Correlation Coefficient

Petroleo Brasileiro  AirAsia X

Very good diversification

The 3 months correlation between Petroleo and AirAsia is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and AirAsia X Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AirAsia X Bhd 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 AirAsia X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AirAsia X Bhd has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and AirAsia X go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and AirAsia X

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.68 times more return on investment than AirAsia X. However, Petroleo Brasileiro Petrobras is 1.48 times less risky than AirAsia X. It trades about 0.05 of its potential returns per unit of risk. AirAsia X Bhd is currently generating about -0.01 per unit of risk. If you would invest  1,131  in Petroleo Brasileiro Petrobras on September 12, 2024 and sell it today you would earn a total of  328.50  from holding Petroleo Brasileiro Petrobras or generate 29.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.89%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  AirAsia X Bhd

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.

AirAsia X Bhd

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AirAsia X Bhd are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, AirAsia X disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and AirAsia X

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

The idea behind Petroleo Brasileiro Petrobras and AirAsia X Bhd 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.