Correlation Between Agrometal SAI and Vale SA
Can any of the company-specific risk be diversified away by investing in both Agrometal SAI 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 Agrometal SAI and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Agrometal SAI and Vale SA, you can compare the effects of market volatilities on Agrometal SAI 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 Agrometal SAI with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agrometal SAI and Vale SA.
Diversification Opportunities for Agrometal SAI and Vale SA
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Agrometal and Vale is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Agrometal SAI and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Agrometal SAI 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 Agrometal SAI 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 Agrometal SAI i.e., Agrometal SAI and Vale SA go up and down completely randomly.
Pair Corralation between Agrometal SAI and Vale SA
Assuming the 90 days trading horizon Agrometal SAI is expected to generate 1.92 times more return on investment than Vale SA. However, Agrometal SAI is 1.92 times more volatile than Vale SA. It trades about 0.38 of its potential returns per unit of risk. Vale SA is currently generating about -0.27 per unit of risk. If you would invest 5,240 in Agrometal SAI on August 31, 2024 and sell it today you would earn a total of 1,860 from holding Agrometal SAI or generate 35.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Agrometal SAI vs. Vale SA
Performance |
| Timeline |
| Agrometal SAI |
| Vale SA |
Agrometal SAI and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Agrometal SAI and Vale SA
The main advantage of trading using opposite Agrometal SAI and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agrometal SAI 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 Agrometal SAI 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. Transportadora de Gas | Vale SA vs. Agrometal SAI | Vale SA vs. Harmony Gold Mining | Vale SA vs. Compania de Transporte |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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