Correlation Between Petro Rio and Mliuz SA

Can any of the company-specific risk be diversified away by investing in both Petro Rio and Mliuz SA 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 Petro Rio and Mliuz SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Petro Rio SA and Mliuz SA, you can compare the effects of market volatilities on Petro Rio and Mliuz SA 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 Petro Rio with a short position of Mliuz SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Petro Rio and Mliuz SA.

Diversification Opportunities for Petro Rio and Mliuz SA

-0.36

Correlation Coefficient

Petro Rio  Mliuz SA

Very good diversification

The 3 months correlation between Petro and Mliuz is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Petro Rio SA and Mliuz SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mliuz SA and Petro Rio 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 Petro Rio SA are associated (or correlated) with Mliuz SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mliuz SA has no effect on the direction of Petro Rio i.e., Petro Rio and Mliuz SA go up and down completely randomly.

Pair Corralation between Petro Rio and Mliuz SA

Assuming the 90 days trading horizon Petro Rio SA is expected to under-perform the Mliuz SA. But the stock apears to be less risky and, when comparing its historical volatility, Petro Rio SA is 2.09 times less risky than Mliuz SA. The stock trades about -0.03 of its potential returns per unit of risk. The Mliuz SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  334.00  in Mliuz SA on December 1, 2024 and sell it today you would lose (12.00) from holding Mliuz SA or give up 3.59% of portfolio value over 90 days.

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

Petro Rio SA  vs.  Mliuz SA

Petro Rio SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petro Rio SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Petro Rio is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Mliuz SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mliuz SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mliuz SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Petro Rio and Mliuz SA

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

The idea behind Petro Rio SA and Mliuz SA 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.