Correlation Between Petróleo Brasileiro and KKR Co

Can any of the company-specific risk be diversified away by investing in both Petróleo Brasileiro and KKR Co 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 Petróleo Brasileiro and KKR Co into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Petrleo Brasileiro SA and KKR Co LP, you can compare the effects of market volatilities on Petróleo Brasileiro and KKR Co 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 Petróleo Brasileiro with a short position of KKR Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petróleo Brasileiro and KKR Co.

Diversification Opportunities for Petróleo Brasileiro and KKR Co

-0.46

Correlation Coefficient

Petróleo Brasileiro  KKR Co

Very good diversification

The 3 months correlation between Petróleo and KKR is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and KKR Co LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKR Co LP and Petróleo 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 Petrleo Brasileiro SA are associated (or correlated) with KKR Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKR Co LP has no effect on the direction of Petróleo Brasileiro i.e., Petróleo Brasileiro and KKR Co go up and down completely randomly.

Pair Corralation between Petróleo Brasileiro and KKR Co

Assuming the 90 days horizon Petrleo Brasileiro SA is expected to under-perform the KKR Co. But the stock apears to be less risky and, when comparing its historical volatility, Petrleo Brasileiro SA is 1.26 times less risky than KKR Co. The stock trades about -0.05 of its potential returns per unit of risk. The KKR Co LP is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  12,361  in KKR Co LP on August 30, 2024 and sell it today you would earn a total of  3,642  from holding KKR Co LP or generate 29.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Petrleo Brasileiro SA  vs.  KKR Co LP

Petróleo Brasileiro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petrleo Brasileiro SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Petróleo Brasileiro is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

KKR Co LP

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in KKR Co LP are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady forward-looking signals, KKR Co reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petróleo Brasileiro and KKR Co

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

The idea behind Petrleo Brasileiro SA and KKR Co LP 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.