Correlation Between Petroleo Brasileiro and Mizuno

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

Diversification Opportunities for Petroleo Brasileiro and Mizuno

0.3

Correlation Coefficient

Petroleo Brasileiro  Mizuno

Weak diversification

The 3 months correlation between Petroleo and Mizuno is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Mizuno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mizuno 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 Mizuno. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mizuno has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Mizuno go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Mizuno

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Mizuno. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 1.61 times less risky than Mizuno. The stock trades about -0.06 of its potential returns per unit of risk. The Mizuno is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  5,550  in Mizuno on September 23, 2024 and sell it today you would earn a total of  50.00  from holding Mizuno or generate 0.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

Petroleo Brasileiro Petrobras  vs.  Mizuno

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 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.

Mizuno

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mizuno are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Mizuno 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 Mizuno

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

The idea behind Petroleo Brasileiro Petrobras and Mizuno 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.