Correlation Between Petroleo Brasileiro and ARK

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

Diversification Opportunities for Petroleo Brasileiro and ARK

-0.08

Correlation Coefficient

Petroleo Brasileiro  ARK

Good diversification

The 3 months correlation between Petroleo and ARK is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and ARK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK 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 ARK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and ARK go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and ARK

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 5.12 times less return on investment than ARK. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 6.44 times less risky than ARK. It trades about 0.07 of its potential returns per unit of risk. ARK is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  24.00  in ARK on September 26, 2024 and sell it today you would earn a total of  28.00  from holding ARK or generate 116.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.28%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  ARK

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 conflicting 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.

ARK

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARK are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, ARK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and ARK

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

The idea behind Petroleo Brasileiro Petrobras and ARK 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.