Correlation Between Petroleo Brasileiro and AXA SA

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

Diversification Opportunities for Petroleo Brasileiro and AXA SA

0.4

Correlation Coefficient

Petroleo Brasileiro  AXA SA

Very weak diversification

The 3 months correlation between Petroleo and AXA is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and AXA SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXA SA 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 AXA SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXA SA has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and AXA SA go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and AXA SA

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 1.44 times less return on investment than AXA SA. In addition to that, Petroleo Brasileiro is 1.62 times more volatile than AXA SA. It trades about 0.11 of its total potential returns per unit of risk. AXA SA is currently generating about 0.26 per unit of volatility. If you would invest  3,391  in AXA SA on December 25, 2024 and sell it today you would earn a total of  579.00  from holding AXA SA or generate 17.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  AXA SA

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 8 (%) 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.

AXA SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AXA SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AXA SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and AXA SA

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

The idea behind Petroleo Brasileiro Petrobras and AXA SA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.