Correlation Between Vale SA and Vytrus Biotech

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

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

Diversification Opportunities for Vale SA and Vytrus Biotech

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Correlation Coefficient

Vale SA  Vytrus Biotech

Pay attention - limited upside

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

Pair Corralation between Vale SA and Vytrus Biotech

Assuming the 90 days trading horizon Vale SA is expected to under-perform the Vytrus Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA is 1.37 times less risky than Vytrus Biotech. The stock trades about 0.0 of its potential returns per unit of risk. The Vytrus Biotech SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  340.00  in Vytrus Biotech SA on September 13, 2024 and sell it today you would lose (120.00) from holding Vytrus Biotech SA or give up 35.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	97.51%
Values	Daily Returns

Vale SA  vs.  Vytrus Biotech SA

Vale SA

Risk-Adjusted Performance

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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 very healthy primary indicators, Vale SA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Vytrus Biotech SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vytrus Biotech SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic 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.

Pair Trading with Vale SA and Vytrus Biotech

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

The idea behind Vale SA and Vytrus Biotech 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.