Correlation Between Vale SA and Metrogas
Can any of the company-specific risk be diversified away by investing in both Vale SA and Metrogas 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 Metrogas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Metrogas SA, you can compare the effects of market volatilities on Vale SA and Metrogas 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 Metrogas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Metrogas.
Diversification Opportunities for Vale SA and Metrogas
Pay attention - limited upside
The 3 months correlation between Vale and Metrogas is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Metrogas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metrogas 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 Metrogas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metrogas SA has no effect on the direction of Vale SA i.e., Vale SA and Metrogas go up and down completely randomly.
Pair Corralation between Vale SA and Metrogas
Assuming the 90 days trading horizon Vale SA is expected to generate 4.18 times less return on investment than Metrogas. But when comparing it to its historical volatility, Vale SA is 1.74 times less risky than Metrogas. It trades about 0.07 of its potential returns per unit of risk. Metrogas SA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 9,200 in Metrogas SA on August 30, 2024 and sell it today you would earn a total of 210,800 from holding Metrogas SA or generate 2291.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Vale SA vs. Metrogas SA
Performance |
| Timeline |
| Vale SA |
| Metrogas SA |
Vale SA and Metrogas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Metrogas
The main advantage of trading using opposite Vale SA and Metrogas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Metrogas 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 Metrogas will offset losses from the drop in Metrogas' long position.| Vale SA vs. BHP Group Limited | Vale SA vs. Rio Tinto PLC | Vale SA vs. BBVA Banco Frances | Vale SA vs. Bolsas y Mercados |
| Metrogas vs. Agrometal SAI | Metrogas vs. Transportadora de Gas | Metrogas vs. Compania de Transporte | Metrogas 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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