Correlation Between Petroleo Brasileiro and A1LK34

Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and A1LK34 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 A1LK34 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 A1LK34, you can compare the effects of market volatilities on Petroleo Brasileiro and A1LK34 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 A1LK34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and A1LK34.

Diversification Opportunities for Petroleo Brasileiro and A1LK34

-0.42

Correlation Coefficient

Petroleo Brasileiro  A1LK34

Very good diversification

The 3 months correlation between Petroleo and A1LK34 is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and A1LK34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1LK34 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 A1LK34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1LK34 has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and A1LK34 go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and A1LK34

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the A1LK34. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 2.86 times less risky than A1LK34. The stock trades about -0.02 of its potential returns per unit of risk. The A1LK34 is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  25,948  in A1LK34 on September 26, 2024 and sell it today you would earn a total of  15,492  from holding A1LK34 or generate 59.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.56%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  A1LK34

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 latest conflicting 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.

A1LK34

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in A1LK34 are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, A1LK34 sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and A1LK34

The main advantage of trading using opposite Petroleo Brasileiro and A1LK34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, A1LK34 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 A1LK34 will offset losses from the drop in A1LK34's long position.

The idea behind Petroleo Brasileiro Petrobras and A1LK34 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.