Correlation Between Petroleo Brasileiro and Lanka Credit

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

Diversification Opportunities for Petroleo Brasileiro and Lanka Credit

0.43

Correlation Coefficient

Petroleo Brasileiro  Lanka Credit

Very weak diversification

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

Pair Corralation between Petroleo Brasileiro and Lanka Credit

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.47 times more return on investment than Lanka Credit. However, Petroleo Brasileiro Petrobras is 2.14 times less risky than Lanka Credit. It trades about 0.12 of its potential returns per unit of risk. Lanka Credit and is currently generating about 0.0 per unit of risk. If you would invest  1,275  in Petroleo Brasileiro Petrobras on December 30, 2024 and sell it today you would earn a total of  163.00  from holding Petroleo Brasileiro Petrobras or generate 12.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.55%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Lanka Credit and

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 weak fundamental drivers, Petroleo Brasileiro reported solid returns over the last few months and may actually be approaching a breakup point.

Lanka Credit

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lanka Credit and has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lanka Credit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and Lanka Credit

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

The idea behind Petroleo Brasileiro Petrobras and Lanka Credit and 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.