Correlation Between Petroleo Brasileiro and MF International

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

Diversification Opportunities for Petroleo Brasileiro and MF International

-0.12

Correlation Coefficient

Petroleo Brasileiro  MF International

Good diversification

The 3 months correlation between Petroleo and MFI is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and mF International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on mF International 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 MF International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of mF International has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and MF International go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and MF International

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 2.91 times less return on investment than MF International. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 7.9 times less risky than MF International. It trades about 0.13 of its potential returns per unit of risk. mF International Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  67.00  in mF International Limited on December 26, 2024 and sell it today you would lose (3.00) from holding mF International Limited or give up 4.48% of portfolio value over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  mF International Limited

Petroleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental drivers, Petroleo Brasileiro reported solid returns over the last few months and may actually be approaching a breakup point.

mF International

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in mF International Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly sluggish technical and fundamental indicators, MF International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and MF International

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

The idea behind Petroleo Brasileiro Petrobras and mF International Limited 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.