Correlation Between Petroleo Brasileiro and MTRLimited

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

Diversification Opportunities for Petroleo Brasileiro and MTRLimited

0.03

Correlation Coefficient

Petroleo Brasileiro  MTRLimited

Significant diversification

The 3 months correlation between Petroleo and MTRLimited is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and MTR Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTR Limited 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 MTRLimited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTR Limited has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and MTRLimited go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and MTRLimited

Considering the 90-day investment horizon Petroleo Brasileiro is expected to generate 4.09 times less return on investment than MTRLimited. But when comparing it to its historical volatility, Petroleo Brasileiro Petrobras is 1.43 times less risky than MTRLimited. It trades about 0.03 of its potential returns per unit of risk. MTR Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  208.00  in MTR Limited on October 5, 2024 and sell it today you would earn a total of  120.00  from holding MTR Limited or generate 57.69% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  MTR Limited

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.

MTR Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MTR Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, MTRLimited is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Petroleo Brasileiro and MTRLimited

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

The idea behind Petroleo Brasileiro Petrobras and MTR 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.