Correlation Between Petroleo Brasileiro and MST Investment

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

Diversification Opportunities for Petroleo Brasileiro and MST Investment

0.17

Correlation Coefficient

Petroleo Brasileiro  MST Investment

Average diversification

The 3 months correlation between Petroleo and MST is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and MST Investment JSC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MST Investment JSC 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 MST Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MST Investment JSC has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and MST Investment go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and MST Investment

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the MST Investment. In addition to that, Petroleo Brasileiro is 1.07 times more volatile than MST Investment JSC. It trades about -0.21 of its total potential returns per unit of risk. MST Investment JSC is currently generating about -0.06 per unit of volatility. If you would invest  700,000  in MST Investment JSC on December 5, 2024 and sell it today you would lose (20,000) from holding MST Investment JSC or give up 2.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  MST Investment JSC

Petroleo Brasileiro

Risk-Adjusted Performance

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.

MST Investment JSC

Risk-Adjusted Performance

Very Weak

Over the last 90 days MST Investment JSC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, MST Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Petroleo Brasileiro and MST Investment

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

The idea behind Petroleo Brasileiro Petrobras and MST Investment JSC 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.