Correlation Between Vale SA and Cia De
Can any of the company-specific risk be diversified away by investing in both Vale SA and Cia De 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 Cia De into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Cia de Ferro, you can compare the effects of market volatilities on Vale SA and Cia De 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 Cia De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Cia De.
Diversification Opportunities for Vale SA and Cia De
Very good diversification
The 3 months correlation between Vale and Cia is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Cia de Ferro in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cia de Ferro 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 Cia De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cia de Ferro has no effect on the direction of Vale SA i.e., Vale SA and Cia De go up and down completely randomly.
Pair Corralation between Vale SA and Cia De
Assuming the 90 days trading horizon Vale SA is expected to under-perform the Cia De. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA is 1.22 times less risky than Cia De. The stock trades about -0.14 of its potential returns per unit of risk. The Cia de Ferro is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 756.00 in Cia de Ferro on September 1, 2024 and sell it today you would earn a total of 24.00 from holding Cia de Ferro or generate 3.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Cia de Ferro
Performance |
| Timeline |
| Vale SA |
| Cia de Ferro |
Vale SA and Cia De Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Cia De
The main advantage of trading using opposite Vale SA and Cia De positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Cia De 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 Cia De will offset losses from the drop in Cia De's long position.| Vale SA vs. Petrleo Brasileiro SA | Vale SA vs. Banco do Brasil | Vale SA vs. Ita Unibanco Holding | Vale SA vs. Banco Bradesco SA |
| Cia De vs. Companhia Siderrgica Nacional | Cia De vs. Usinas Siderrgicas de | Cia De vs. Companhia Energtica de | Cia De vs. Cosan 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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