Correlation Between Petroleo Brasileiro and Montea Comm

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

Diversification Opportunities for Petroleo Brasileiro and Montea Comm

0.65

Correlation Coefficient

Petroleo Brasileiro  Montea Comm

Poor diversification

The 3 months correlation between Petroleo and Montea is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Montea Comm VA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montea Comm VA 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 Montea Comm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montea Comm VA has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Montea Comm go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Montea Comm

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.27 times more return on investment than Montea Comm. However, Petroleo Brasileiro is 1.27 times more volatile than Montea Comm VA. It trades about -0.01 of its potential returns per unit of risk. Montea Comm VA is currently generating about -0.17 per unit of risk. If you would invest  1,327  in Petroleo Brasileiro Petrobras on September 27, 2024 and sell it today you would lose (17.50) from holding Petroleo Brasileiro Petrobras or give up 1.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.67%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Montea Comm VA

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 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.

Montea Comm VA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montea Comm VA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Petroleo Brasileiro and Montea Comm

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

The idea behind Petroleo Brasileiro Petrobras and Montea Comm VA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..