Correlation Between Petroleo Brasileiro and Kakao Games

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

Diversification Opportunities for Petroleo Brasileiro and Kakao Games

0.09

Correlation Coefficient

Petroleo Brasileiro  Kakao Games

Significant diversification

The 3 months correlation between Petroleo and Kakao is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Kakao Games Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kakao Games Corp 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 Kakao Games. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kakao Games Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Kakao Games go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Kakao Games

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Kakao Games. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 2.37 times less risky than Kakao Games. The stock trades about -0.03 of its potential returns per unit of risk. The Kakao Games Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,693,000  in Kakao Games Corp on September 15, 2024 and sell it today you would earn a total of  397,000  from holding Kakao Games Corp or generate 23.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Kakao Games Corp

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.

Kakao Games Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kakao Games Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kakao Games sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Kakao Games

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

The idea behind Petroleo Brasileiro Petrobras and Kakao Games Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.