Correlation Between Petroleo Brasileiro and MGM China

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

Diversification Opportunities for Petroleo Brasileiro and MGM China

0.47

Correlation Coefficient

Petroleo Brasileiro  MGM China

Very weak diversification

The 3 months correlation between Petroleo and MGM is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and MGM China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGM China Holdings 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 MGM China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGM China Holdings has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and MGM China go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and MGM China

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to generate 1.36 times more return on investment than MGM China. However, Petroleo Brasileiro is 1.36 times more volatile than MGM China Holdings. It trades about 0.04 of its potential returns per unit of risk. MGM China Holdings is currently generating about 0.0 per unit of risk. If you would invest  1,287  in Petroleo Brasileiro Petrobras on October 7, 2024 and sell it today you would earn a total of  15.00  from holding Petroleo Brasileiro Petrobras or generate 1.17% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  MGM China Holdings

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 unfluctuating 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.

MGM China Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MGM China Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Petroleo Brasileiro and MGM China

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

The idea behind Petroleo Brasileiro Petrobras and MGM China Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.