Correlation Between Vale SA and Er Therapeutics

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

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

Diversification Opportunities for Vale SA and Er Therapeutics

0.0

Correlation Coefficient

Vale SA  Er Therapeutics

Pay attention - limited upside

The 3 months correlation between Vale and PNGM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Er Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Er Therapeutics and Vale SA 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 SA ADR are associated (or correlated) with Er Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Er Therapeutics has no effect on the direction of Vale SA i.e., Vale SA and Er Therapeutics go up and down completely randomly.

Pair Corralation between Vale SA and Er Therapeutics

If you would invest  0.01  in Er Therapeutics on September 25, 2024 and sell it today you would earn a total of  0.00  from holding Er Therapeutics or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Vale SA ADR  vs.  Er Therapeutics

Vale SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vale SA ADR 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 essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Er Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Er Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Er Therapeutics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vale SA and Er Therapeutics

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

The idea behind Vale SA ADR and Er Therapeutics 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 Transaction History module to view history of all your transactions and understand their impact on performance.