Correlation Between Petroleo Brasileiro and Merrill Lynch

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

Diversification Opportunities for Petroleo Brasileiro and Merrill Lynch

0.44

Correlation Coefficient

Petroleo Brasileiro  Merrill Lynch

Very weak diversification

The 3 months correlation between Petroleo and Merrill is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Merrill Lynch Depositor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merrill Lynch Depositor 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 Merrill Lynch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merrill Lynch Depositor has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Merrill Lynch go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Merrill Lynch

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 0.81 times more return on investment than Merrill Lynch. However, Petroleo Brasileiro Petrobras is 1.24 times less risky than Merrill Lynch. It trades about 0.07 of its potential returns per unit of risk. Merrill Lynch Depositor is currently generating about 0.02 per unit of risk. If you would invest  720.00  in Petroleo Brasileiro Petrobras on September 20, 2024 and sell it today you would earn a total of  583.00  from holding Petroleo Brasileiro Petrobras or generate 80.97% 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.  Merrill Lynch Depositor

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.

Merrill Lynch Depositor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Merrill Lynch Depositor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Merrill Lynch 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 Merrill Lynch

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

The idea behind Petroleo Brasileiro Petrobras and Merrill Lynch Depositor 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.