Correlation Between Petroleo Brasileiro and Aqr Risk-balanced

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

Diversification Opportunities for Petroleo Brasileiro and Aqr Risk-balanced

0.74

Correlation Coefficient

Petroleo Brasileiro  Aqr Risk-balanced

Poor diversification

The 3 months correlation between Petroleo and AQR is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Aqr Risk Balanced Modities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aqr Risk Balanced 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 Aqr Risk-balanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aqr Risk Balanced has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Aqr Risk-balanced go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Aqr Risk-balanced

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 2.19 times more return on investment than Aqr Risk-balanced. However, Petroleo Brasileiro is 2.19 times more volatile than Aqr Risk Balanced Modities. It trades about 0.12 of its potential returns per unit of risk. Aqr Risk Balanced Modities is currently generating about 0.22 per unit of risk. If you would invest  1,258  in Petroleo Brasileiro Petrobras on December 20, 2024 and sell it today you would earn a total of  145.00  from holding Petroleo Brasileiro Petrobras or generate 11.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Aqr Risk Balanced Modities

Petroleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Petroleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Aqr Risk Balanced

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aqr Risk Balanced Modities are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Aqr Risk-balanced may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Petroleo Brasileiro and Aqr Risk-balanced

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

The idea behind Petroleo Brasileiro Petrobras and Aqr Risk Balanced Modities 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.