Correlation Between Vale SA and Compaa Minera

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

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

Diversification Opportunities for Vale SA and Compaa Minera

0.55

Correlation Coefficient

Vale SA  Compaa Minera

Very weak diversification

The 3 months correlation between Vale and Compaa is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Compaa Minera Autln in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compaa Minera Autln 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 Compaa Minera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compaa Minera Autln has no effect on the direction of Vale SA i.e., Vale SA and Compaa Minera go up and down completely randomly.

Pair Corralation between Vale SA and Compaa Minera

Assuming the 90 days trading horizon Vale SA is expected to under-perform the Compaa Minera. In addition to that, Vale SA is 1.47 times more volatile than Compaa Minera Autln. It trades about -0.19 of its total potential returns per unit of risk. Compaa Minera Autln is currently generating about -0.13 per unit of volatility. If you would invest  790.00  in Compaa Minera Autln on September 26, 2024 and sell it today you would lose (89.00) from holding Compaa Minera Autln or give up 11.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.08%
Values	Daily Returns

Vale SA  vs.  Compaa Minera Autln

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.

Compaa Minera Autln

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compaa Minera Autln has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Vale SA and Compaa Minera

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

The idea behind Vale SA and Compaa Minera Autln 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.