Correlation Between Petroleo Brasileiro and LG Gerd

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

Diversification Opportunities for Petroleo Brasileiro and LG Gerd

-0.18

Correlation Coefficient

Petroleo Brasileiro  LG Gerd

Good diversification

The 3 months correlation between Petroleo and GERD is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and LG Gerd Kommer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Gerd Kommer 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 LG Gerd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Gerd Kommer has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and LG Gerd go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and LG Gerd

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the LG Gerd. In addition to that, Petroleo Brasileiro is 2.19 times more volatile than LG Gerd Kommer. It trades about 0.0 of its total potential returns per unit of risk. LG Gerd Kommer is currently generating about 0.08 per unit of volatility. If you would invest  1,098  in LG Gerd Kommer on September 23, 2024 and sell it today you would earn a total of  88.00  from holding LG Gerd Kommer or generate 8.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.69%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  LG Gerd Kommer

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

LG Gerd Kommer

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LG Gerd Kommer are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, LG Gerd is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Petroleo Brasileiro and LG Gerd

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

The idea behind Petroleo Brasileiro Petrobras and LG Gerd Kommer 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.