Correlation Between F5 Networks and Vale SA

Can any of the company-specific risk be diversified away by investing in both F5 Networks and Vale 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 F5 Networks and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between F5 Networks and Vale SA, you can compare the effects of market volatilities on F5 Networks and Vale 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 F5 Networks with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of F5 Networks and Vale SA.

Diversification Opportunities for F5 Networks and Vale SA

-0.58

Correlation Coefficient

F5 Networks  Vale SA

Excellent diversification

The 3 months correlation between FFIV and Vale is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding F5 Networks and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and F5 Networks 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 F5 Networks are associated (or correlated) with Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of F5 Networks i.e., F5 Networks and Vale SA go up and down completely randomly.

Pair Corralation between F5 Networks and Vale SA

If you would invest  464,253  in F5 Networks on September 27, 2024 and sell it today you would earn a total of  0.00  from holding F5 Networks or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

F5 Networks  vs.  Vale SA

F5 Networks

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in F5 Networks are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, F5 Networks showed solid returns over the last few months and may actually be approaching a breakup point.

Vale SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vale SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with F5 Networks and Vale SA

The main advantage of trading using opposite F5 Networks and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if F5 Networks position performs unexpectedly, Vale 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 Vale SA will offset losses from the drop in Vale SA's long position.

The idea behind F5 Networks and Vale 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.