Correlation Between Petroleo Brasileiro and Lemtech Holdings

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

Diversification Opportunities for Petroleo Brasileiro and Lemtech Holdings

-0.34

Correlation Coefficient

Petroleo Brasileiro  Lemtech Holdings

Very good diversification

The 3 months correlation between Petroleo and Lemtech is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Lemtech Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lemtech Holdings 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 Lemtech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lemtech Holdings has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Lemtech Holdings go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Lemtech Holdings

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 11.57 times less return on investment than Lemtech Holdings. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.83 times less risky than Lemtech Holdings. It trades about 0.04 of its potential returns per unit of risk. Lemtech Holdings Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  12,876  in Lemtech Holdings Co on October 7, 2024 and sell it today you would earn a total of  2,374  from holding Lemtech Holdings Co or generate 18.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Lemtech Holdings Co

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 unfluctuating 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.

Lemtech Holdings

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lemtech Holdings Co are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Lemtech Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Lemtech Holdings

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

The idea behind Petroleo Brasileiro Petrobras and Lemtech Holdings Co 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.