Correlation Between Petroleo Brasileiro and Mainstay Epoch

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

Diversification Opportunities for Petroleo Brasileiro and Mainstay Epoch

0.66

Correlation Coefficient

Petroleo Brasileiro  Mainstay Epoch

Poor diversification

The 3 months correlation between Petroleo and Mainstay is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Mainstay Epoch International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstay Epoch Inter 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 Mainstay Epoch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstay Epoch Inter has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Mainstay Epoch go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Mainstay Epoch

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 1.23 times less return on investment than Mainstay Epoch. In addition to that, Petroleo Brasileiro is 2.43 times more volatile than Mainstay Epoch International. It trades about 0.03 of its total potential returns per unit of risk. Mainstay Epoch International is currently generating about 0.1 per unit of volatility. If you would invest  3,929  in Mainstay Epoch International on December 4, 2024 and sell it today you would earn a total of  157.00  from holding Mainstay Epoch International or generate 4.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Mainstay Epoch International

Petroleo Brasileiro

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Mainstay Epoch Inter

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstay Epoch International are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong essential indicators, Mainstay Epoch 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 Mainstay Epoch

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

The idea behind Petroleo Brasileiro Petrobras and Mainstay Epoch International 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.