Correlation Between Vale SA and Worthington Steel
Can any of the company-specific risk be diversified away by investing in both Vale SA and Worthington Steel 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 Worthington Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA ADR and Worthington Steel, you can compare the effects of market volatilities on Vale SA and Worthington Steel 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 Worthington Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Worthington Steel.
Diversification Opportunities for Vale SA and Worthington Steel
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vale and Worthington is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Worthington Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Worthington Steel 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 ADR are associated (or correlated) with Worthington Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Worthington Steel has no effect on the direction of Vale SA i.e., Vale SA and Worthington Steel go up and down completely randomly.
Pair Corralation between Vale SA and Worthington Steel
Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the Worthington Steel. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA ADR is 2.0 times less risky than Worthington Steel. The stock trades about -0.19 of its potential returns per unit of risk. The Worthington Steel is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 3,654 in Worthington Steel on August 26, 2024 and sell it today you would earn a total of 860.00 from holding Worthington Steel or generate 23.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA ADR vs. Worthington Steel
Performance |
| Timeline |
| Vale SA ADR |
| Worthington Steel |
Vale SA and Worthington Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Worthington Steel
The main advantage of trading using opposite Vale SA and Worthington Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Worthington Steel 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 Worthington Steel will offset losses from the drop in Worthington Steel's long position.| Vale SA vs. BHP Group Limited | Vale SA vs. Teck Resources Ltd | Vale SA vs. Lithium Americas Corp | Vale SA vs. MP Materials Corp |
| Worthington Steel vs. Everus Construction Group | Worthington Steel vs. SkyWest | Worthington Steel vs. Warner Music Group | Worthington Steel vs. Mesa Air Group |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
Other Complementary Tools
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account |