Correlation Between Petroleo Brasileiro and AA Mission

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

Diversification Opportunities for Petroleo Brasileiro and AA Mission

-0.43

Correlation Coefficient

Petroleo Brasileiro  AA Mission

Very good diversification

The 3 months correlation between Petroleo and AAM is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and AA Mission Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AA Mission Acquisition 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 AA Mission. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AA Mission Acquisition has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and AA Mission go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and AA Mission

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the AA Mission. In addition to that, Petroleo Brasileiro is 30.86 times more volatile than AA Mission Acquisition. It trades about -0.1 of its total potential returns per unit of risk. AA Mission Acquisition is currently generating about 0.15 per unit of volatility. If you would invest  1,005  in AA Mission Acquisition on September 17, 2024 and sell it today you would earn a total of  2.00  from holding AA Mission Acquisition or generate 0.2% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  AA Mission Acquisition

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

AA Mission Acquisition

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AA Mission Acquisition are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AA Mission is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and AA Mission

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

The idea behind Petroleo Brasileiro Petrobras and AA Mission Acquisition 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.