Correlation Between ACS Actividades and Petroleo Brasileiro

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Can any of the company-specific risk be diversified away by investing in both ACS Actividades and Petroleo Brasileiro 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 ACS Actividades and Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ACS Actividades de and Petroleo Brasileiro SA, you can compare the effects of market volatilities on ACS Actividades and Petroleo Brasileiro 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 ACS Actividades with a short position of Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of ACS Actividades and Petroleo Brasileiro.

Diversification Opportunities for ACS Actividades and Petroleo Brasileiro

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between ACS and Petroleo is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding ACS Actividades de and Petroleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro and ACS Actividades 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 ACS Actividades de are associated (or correlated) with Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of ACS Actividades i.e., ACS Actividades and Petroleo Brasileiro go up and down completely randomly.

Pair Corralation between ACS Actividades and Petroleo Brasileiro

Assuming the 90 days trading horizon ACS Actividades is expected to generate 37.31 times less return on investment than Petroleo Brasileiro. But when comparing it to its historical volatility, ACS Actividades de is 34.14 times less risky than Petroleo Brasileiro. It trades about 0.1 of its potential returns per unit of risk. Petroleo Brasileiro SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  94.00  in Petroleo Brasileiro SA on August 30, 2024 and sell it today you would earn a total of  548.00  from holding Petroleo Brasileiro SA or generate 582.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy90.55%
ValuesDaily Returns

ACS Actividades de  vs.  Petroleo Brasileiro SA

 Performance 
       Timeline  
ACS Actividades de 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ACS Actividades de are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ACS Actividades is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
Petroleo Brasileiro 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Petroleo Brasileiro SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Petroleo Brasileiro is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

ACS Actividades and Petroleo Brasileiro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ACS Actividades and Petroleo Brasileiro

The main advantage of trading using opposite ACS Actividades and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ACS Actividades position performs unexpectedly, Petroleo Brasileiro 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 Petroleo Brasileiro will offset losses from the drop in Petroleo Brasileiro's long position.
The idea behind ACS Actividades de and Petroleo Brasileiro 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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