Correlation Between Vale SA and Cia De

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

By analyzing existing cross correlation between Vale SA and Cia de Ferro, you can compare the effects of market volatilities on Vale SA and Cia De 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 Cia De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Cia De.

Diversification Opportunities for Vale SA and Cia De

-0.4

Correlation Coefficient

Vale SA  Cia De

Very good diversification

The 3 months correlation between Vale and Cia is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Cia de Ferro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cia de Ferro 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 are associated (or correlated) with Cia De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cia de Ferro has no effect on the direction of Vale SA i.e., Vale SA and Cia De go up and down completely randomly.

Pair Corralation between Vale SA and Cia De

Assuming the 90 days trading horizon Vale SA is expected to generate 1.03 times more return on investment than Cia De. However, Vale SA is 1.03 times more volatile than Cia de Ferro. It trades about 0.03 of its potential returns per unit of risk. Cia de Ferro is currently generating about -0.02 per unit of risk. If you would invest  5,811  in Vale SA on September 12, 2024 and sell it today you would earn a total of  166.00  from holding Vale SA or generate 2.86% return on investment over 90 days.

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

Vale SA  vs.  Cia de Ferro

Vale SA

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vale SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Cia de Ferro

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cia de Ferro has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cia De is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vale SA and Cia De

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

The idea behind Vale SA and Cia de Ferro 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.