Correlation Between Transportadora and Vale SA
Can any of the company-specific risk be diversified away by investing in both Transportadora 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 Transportadora and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Transportadora de Gas and Vale SA, you can compare the effects of market volatilities on Transportadora 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 Transportadora with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and Vale SA.
Diversification Opportunities for Transportadora and Vale SA
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Transportadora and Vale is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and Vale SA go up and down completely randomly.
Pair Corralation between Transportadora and Vale SA
Assuming the 90 days trading horizon Transportadora de Gas is expected to under-perform the Vale SA. In addition to that, Transportadora is 2.92 times more volatile than Vale SA. It trades about -0.1 of its total potential returns per unit of risk. Vale SA is currently generating about 0.24 per unit of volatility. If you would invest 507,000 in Vale SA on October 20, 2024 and sell it today you would earn a total of 29,000 from holding Vale SA or generate 5.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Transportadora de Gas vs. Vale SA
Performance |
| Timeline |
| Transportadora de Gas |
| Vale SA |
Transportadora and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Transportadora and Vale SA
The main advantage of trading using opposite Transportadora and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora 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.| Transportadora vs. Naturgy BAN SA | Transportadora vs. Distribuidora de Gas | Transportadora vs. Walmart | Transportadora vs. Central Puerto SA |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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