Correlation Between Petroleo Brasileiro and ALX Resources
Can any of the company-specific risk be diversified away by investing in both Petroleo Brasileiro and ALX Resources 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 ALX Resources 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 ALX Resources Corp, you can compare the effects of market volatilities on Petroleo Brasileiro and ALX Resources 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 ALX Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petroleo Brasileiro and ALX Resources.
Diversification Opportunities for Petroleo Brasileiro and ALX Resources
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Petroleo and ALX is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and ALX Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALX Resources Corp 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 ALX Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALX Resources Corp has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and ALX Resources go up and down completely randomly.
Pair Corralation between Petroleo Brasileiro and ALX Resources
Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 4.06 times less return on investment than ALX Resources. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 5.73 times less risky than ALX Resources. It trades about 0.08 of its potential returns per unit of risk. ALX Resources Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2.47 in ALX Resources Corp on September 3, 2024 and sell it today you would lose (0.67) from holding ALX Resources Corp or give up 27.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Petroleo Brasileiro Petrobras vs. ALX Resources Corp
Performance |
| Timeline |
| Petroleo Brasileiro |
| ALX Resources Corp |
Petroleo Brasileiro and ALX Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Petroleo Brasileiro and ALX Resources
The main advantage of trading using opposite Petroleo Brasileiro and ALX Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Petroleo Brasileiro position performs unexpectedly, ALX Resources 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 ALX Resources will offset losses from the drop in ALX Resources' long position.| Petroleo Brasileiro vs. SPACE | Petroleo Brasileiro vs. Ampleforth | Petroleo Brasileiro vs. ionet | Petroleo Brasileiro vs. KIN |
| ALX Resources vs. Seadrill Limited | ALX Resources vs. Noble plc | ALX Resources vs. Borr Drilling | ALX Resources vs. SCOR PK |
Check out your portfolio center.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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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