Correlation Between Vale Indonesia and Sillo Maritime

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

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

Diversification Opportunities for Vale Indonesia and Sillo Maritime

0.68

Correlation Coefficient

Vale Indonesia  Sillo Maritime

Poor diversification

The 3 months correlation between Vale and Sillo is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vale Indonesia Tbk and Sillo Maritime Perdana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sillo Maritime Perdana and Vale Indonesia 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 Vale Indonesia Tbk are associated (or correlated) with Sillo Maritime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sillo Maritime Perdana has no effect on the direction of Vale Indonesia i.e., Vale Indonesia and Sillo Maritime go up and down completely randomly.

Pair Corralation between Vale Indonesia and Sillo Maritime

Assuming the 90 days trading horizon Vale Indonesia Tbk is expected to generate 0.53 times more return on investment than Sillo Maritime. However, Vale Indonesia Tbk is 1.87 times less risky than Sillo Maritime. It trades about 0.06 of its potential returns per unit of risk. Sillo Maritime Perdana is currently generating about -0.02 per unit of risk. If you would invest  372,000  in Vale Indonesia Tbk on September 15, 2024 and sell it today you would earn a total of  23,000  from holding Vale Indonesia Tbk or generate 6.18% return on investment over 90 days.

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

Vale Indonesia Tbk  vs.  Sillo Maritime Perdana

Vale Indonesia Tbk

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vale Indonesia Tbk are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Vale Indonesia may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sillo Maritime Perdana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sillo Maritime Perdana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Sillo Maritime is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vale Indonesia and Sillo Maritime

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

The idea behind Vale Indonesia Tbk and Sillo Maritime Perdana 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.