Correlation Between CN MODERN and Vale SA
Can any of the company-specific risk be diversified away by investing in both CN MODERN and Vale SA 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 CN MODERN and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CN MODERN DAIRY and Vale SA, you can compare the effects of market volatilities on CN MODERN and Vale SA 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 CN MODERN with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CN MODERN and Vale SA.
Diversification Opportunities for CN MODERN and Vale SA
Very weak diversification
The 3 months correlation between 07M and Vale is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CN MODERN DAIRY and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and CN MODERN 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 CN MODERN DAIRY are associated (or correlated) with Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of CN MODERN i.e., CN MODERN and Vale SA go up and down completely randomly.
Pair Corralation between CN MODERN and Vale SA
Assuming the 90 days trading horizon CN MODERN is expected to generate 1.76 times less return on investment than Vale SA. In addition to that, CN MODERN is 1.11 times more volatile than Vale SA. It trades about 0.02 of its total potential returns per unit of risk. Vale SA is currently generating about 0.04 per unit of volatility. If you would invest 664.00 in Vale SA on September 5, 2024 and sell it today you would earn a total of 285.00 from holding Vale SA or generate 42.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CN MODERN DAIRY vs. Vale SA
Performance |
| Timeline |
| CN MODERN DAIRY |
| Vale SA |
CN MODERN and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CN MODERN and Vale SA
The main advantage of trading using opposite CN MODERN and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CN MODERN position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA's long position.The idea behind CN MODERN DAIRY and Vale 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.| Vale SA vs. SENECA FOODS A | Vale SA vs. CN MODERN DAIRY | Vale SA vs. Pentair plc | Vale SA vs. Westinghouse Air Brake |
Check out your portfolio center.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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