Correlation Between Vale SA and Transportadora
Can any of the company-specific risk be diversified away by investing in both Vale SA and Transportadora 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 Transportadora into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Transportadora de Gas, you can compare the effects of market volatilities on Vale SA and Transportadora 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 Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Transportadora.
Diversification Opportunities for Vale SA and Transportadora
-0.91 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Vale and Transportadora is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas 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 Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of Vale SA i.e., Vale SA and Transportadora go up and down completely randomly.
Pair Corralation between Vale SA and Transportadora
Assuming the 90 days trading horizon Vale SA is expected to generate 0.34 times more return on investment than Transportadora. However, Vale SA is 2.92 times less risky than Transportadora. It trades about 0.24 of its potential returns per unit of risk. Transportadora de Gas is currently generating about -0.1 per unit of risk. 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 |
Vale SA vs. Transportadora de Gas
Performance |
| Timeline |
| Vale SA |
| Transportadora de Gas |
Vale SA and Transportadora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Transportadora
The main advantage of trading using opposite Vale SA and Transportadora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Transportadora 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 Transportadora will offset losses from the drop in Transportadora's long position.The idea behind Vale SA and Transportadora de Gas 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.| 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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