Correlation Between SEALED AIR and Vale SA
Can any of the company-specific risk be diversified away by investing in both SEALED AIR 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 SEALED AIR and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SEALED AIR and Vale SA, you can compare the effects of market volatilities on SEALED AIR 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 SEALED AIR with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEALED AIR and Vale SA.
Diversification Opportunities for SEALED AIR and Vale SA
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SEALED and Vale is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding SEALED AIR and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and SEALED AIR 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 SEALED AIR 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 SEALED AIR i.e., SEALED AIR and Vale SA go up and down completely randomly.
Pair Corralation between SEALED AIR and Vale SA
Assuming the 90 days trading horizon SEALED AIR is expected to generate 1.0 times more return on investment than Vale SA. However, SEALED AIR is 1.0 times more volatile than Vale SA. It trades about -0.02 of its potential returns per unit of risk. Vale SA is currently generating about -0.03 per unit of risk. If you would invest 4,484 in SEALED AIR on September 24, 2024 and sell it today you would lose (1,244) from holding SEALED AIR or give up 27.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SEALED AIR vs. Vale SA
Performance |
| Timeline |
| SEALED AIR |
| Vale SA |
SEALED AIR and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SEALED AIR and Vale SA
The main advantage of trading using opposite SEALED AIR and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SEALED AIR 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 SEALED AIR 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. AIR LIQUIDE ADR | Vale SA vs. SYSTEMAIR AB | Vale SA vs. SEALED AIR | Vale SA vs. Harmony Gold Mining |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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