Correlation Between Petroleo Brasileiro and A1KA34

Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and A1KA34 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 A1KA34 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 A1KA34, you can compare the effects of market volatilities on Petroleo Brasileiro and A1KA34 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 A1KA34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and A1KA34.

Diversification Opportunities for Petroleo Brasileiro and A1KA34

-0.45

Correlation Coefficient

Petroleo Brasileiro  A1KA34

Very good diversification

The 3 months correlation between Petroleo and A1KA34 is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and A1KA34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on A1KA34 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 A1KA34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of A1KA34 has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and A1KA34 go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and A1KA34

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 6.05 times less return on investment than A1KA34. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.61 times less risky than A1KA34. It trades about 0.02 of its potential returns per unit of risk. A1KA34 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,550  in A1KA34 on September 12, 2024 and sell it today you would earn a total of  415.00  from holding A1KA34 or generate 9.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  A1KA34

Petroleo Brasileiro

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental drivers, Petroleo Brasileiro is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

A1KA34

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in A1KA34 are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward-looking signals, A1KA34 may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Petroleo Brasileiro and A1KA34

The main advantage of trading using opposite Petroleo Brasileiro and A1KA34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, A1KA34 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 A1KA34 will offset losses from the drop in A1KA34's long position.

The idea behind Petroleo Brasileiro Petrobras and A1KA34 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.