Correlation Between Petroleo Brasileiro and Morgan Stanley

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

Diversification Opportunities for Petroleo Brasileiro and Morgan Stanley

-0.24

Correlation Coefficient

Petroleo Brasileiro  Morgan Stanley

Very good diversification

The 3 months correlation between Petroleo and Morgan is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Morgan Stanley Institutional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morgan Stanley Insti 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 Morgan Stanley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morgan Stanley Insti has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Morgan Stanley go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Morgan Stanley

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Morgan Stanley. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.06 times less risky than Morgan Stanley. The stock trades about -0.25 of its potential returns per unit of risk. The Morgan Stanley Institutional is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,817  in Morgan Stanley Institutional on September 25, 2024 and sell it today you would lose (42.00) from holding Morgan Stanley Institutional or give up 2.31% 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.  Morgan Stanley Institutional

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 conflicting 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.

Morgan Stanley Insti

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Morgan Stanley Institutional are ranked lower than 17 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Morgan Stanley showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Morgan Stanley

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

The idea behind Petroleo Brasileiro Petrobras and Morgan Stanley Institutional 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 Anywhere module to track or share privately all of your investments from the convenience of any device.