Correlation Between Vale SA and Mdica Sur

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Can any of the company-specific risk be diversified away by investing in both Vale SA and Mdica Sur 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 Mdica Sur into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Mdica Sur SAB, you can compare the effects of market volatilities on Vale SA and Mdica Sur 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 Mdica Sur. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Mdica Sur.

Diversification Opportunities for Vale SA and Mdica Sur

-0.88
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Vale and Mdica is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Mdica Sur SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mdica Sur SAB 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 Mdica Sur. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mdica Sur SAB has no effect on the direction of Vale SA i.e., Vale SA and Mdica Sur go up and down completely randomly.

Pair Corralation between Vale SA and Mdica Sur

Assuming the 90 days trading horizon Vale SA is expected to under-perform the Mdica Sur. In addition to that, Vale SA is 1.4 times more volatile than Mdica Sur SAB. It trades about -0.01 of its total potential returns per unit of risk. Mdica Sur SAB is currently generating about 0.0 per unit of volatility. If you would invest  3,445  in Mdica Sur SAB on November 2, 2024 and sell it today you would lose (15.00) from holding Mdica Sur SAB or give up 0.44% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy98.04%
ValuesDaily Returns

Vale SA  vs.  Mdica Sur SAB

 Performance 
       Timeline  
Vale SA 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Vale SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Mdica Sur SAB 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Mdica Sur SAB are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Mdica Sur sustained solid returns over the last few months and may actually be approaching a breakup point.

Vale SA and Mdica Sur Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vale SA and Mdica Sur

The main advantage of trading using opposite Vale SA and Mdica Sur positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Mdica Sur 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 Mdica Sur will offset losses from the drop in Mdica Sur's long position.
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The idea behind Vale SA and Mdica Sur SAB 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.
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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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