Correlation Between Petro Rio and Monster Beverage

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

Diversification Opportunities for Petro Rio and Monster Beverage

-0.87

Correlation Coefficient

Petro Rio  Monster Beverage

Pay attention - limited upside

The 3 months correlation between Petro and Monster is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Petro Rio SA and Monster Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monster Beverage 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 Monster Beverage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monster Beverage has no effect on the direction of Petro Rio i.e., Petro Rio and Monster Beverage go up and down completely randomly.

Pair Corralation between Petro Rio and Monster Beverage

Assuming the 90 days trading horizon Petro Rio SA is expected to generate 1.0 times more return on investment than Monster Beverage. However, Petro Rio is 1.0 times more volatile than Monster Beverage. It trades about 0.12 of its potential returns per unit of risk. Monster Beverage is currently generating about -0.06 per unit of risk. If you would invest  3,935  in Petro Rio SA on September 14, 2024 and sell it today you would earn a total of  170.00  from holding Petro Rio SA or generate 4.32% return on investment over 90 days.

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

Petro Rio SA  vs.  Monster Beverage

Petro Rio SA

Risk-Adjusted Performance

0 of 100

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Monster Beverage

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monster Beverage are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Monster Beverage sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Petro Rio and Monster Beverage

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

The idea behind Petro Rio SA and Monster Beverage 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 Global Correlations module to find global opportunities by holding instruments from different markets.