Correlation Between Vale SA and Industria
Can any of the company-specific risk be diversified away by investing in both Vale SA and Industria 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 Industria into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Industria de Diseno, you can compare the effects of market volatilities on Vale SA and Industria 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 Industria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Industria.
Diversification Opportunities for Vale SA and Industria
Poor diversification
The 3 months correlation between Vale and Industria is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Industria de Diseno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industria de Diseno 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 Industria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industria de Diseno has no effect on the direction of Vale SA i.e., Vale SA and Industria go up and down completely randomly.
Pair Corralation between Vale SA and Industria
Assuming the 90 days trading horizon Vale SA is expected to under-perform the Industria. In addition to that, Vale SA is 1.96 times more volatile than Industria de Diseno. It trades about -0.14 of its total potential returns per unit of risk. Industria de Diseno is currently generating about -0.09 per unit of volatility. If you would invest 5,419 in Industria de Diseno on August 27, 2024 and sell it today you would lose (123.00) from holding Industria de Diseno or give up 2.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Industria de Diseno
Performance |
| Timeline |
| Vale SA |
| Industria de Diseno |
Vale SA and Industria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Industria
The main advantage of trading using opposite Vale SA and Industria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Industria 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 Industria will offset losses from the drop in Industria's long position.| Vale SA vs. Squirrel Media SA | Vale SA vs. Labiana Health SA | Vale SA vs. Tier1 Technology SA | Vale SA vs. Inhome Prime Properties |
| Industria vs. Iberdrola SA | Industria vs. Repsol | Industria vs. Banco Santander | Industria vs. ACS Actividades de |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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