Correlation Between Petroleo Brasileiro and LG Clean

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

Diversification Opportunities for Petroleo Brasileiro and LG Clean

0.59

Correlation Coefficient

Petroleo Brasileiro  LG Clean

Very weak diversification

The 3 months correlation between Petroleo and RENW is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and LG Clean Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LG Clean Energy 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 Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LG Clean Energy has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and LG Clean go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and LG Clean

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the LG Clean. In addition to that, Petroleo Brasileiro is 1.49 times more volatile than LG Clean Energy. It trades about -0.21 of its total potential returns per unit of risk. LG Clean Energy is currently generating about -0.15 per unit of volatility. If you would invest  833.00  in LG Clean Energy on September 28, 2024 and sell it today you would lose (33.00) from holding LG Clean Energy or give up 3.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  LG Clean Energy

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 unsteady 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.

LG Clean Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LG Clean Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Etf's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Petroleo Brasileiro and LG Clean

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

The idea behind Petroleo Brasileiro Petrobras and LG Clean Energy 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.