Correlation Between Petroleo Brasileiro and Mineral Mountain

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

Diversification Opportunities for Petroleo Brasileiro and Mineral Mountain

-0.73

Correlation Coefficient

Petroleo Brasileiro  Mineral Mountain

Pay attention - limited upside

The 3 months correlation between Petroleo and Mineral is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Petroleo Brasileiro Petrobras and Mineral Mountain Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Mountain Mining 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 Mineral Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Mountain Mining has no effect on the direction of Petroleo Brasileiro i.e., Petroleo Brasileiro and Mineral Mountain go up and down completely randomly.

Pair Corralation between Petroleo Brasileiro and Mineral Mountain

Considering the 90-day investment horizon Petroleo Brasileiro Petrobras is expected to under-perform the Mineral Mountain. But the stock apears to be less risky and, when comparing its historical volatility, Petroleo Brasileiro Petrobras is 20.75 times less risky than Mineral Mountain. The stock trades about -0.04 of its potential returns per unit of risk. The Mineral Mountain Mining is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  0.01  in Mineral Mountain Mining on September 16, 2024 and sell it today you would earn a total of  0.00  from holding Mineral Mountain Mining or generate 0.0% return on investment over 90 days.

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

Petroleo Brasileiro Petrobras  vs.  Mineral Mountain Mining

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.

Mineral Mountain Mining

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mineral Mountain Mining are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Mineral Mountain displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petroleo Brasileiro and Mineral Mountain

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

The idea behind Petroleo Brasileiro Petrobras and Mineral Mountain Mining 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.