Correlation Between KRAKATAU STEEL and Vale SA

Can any of the company-specific risk be diversified away by investing in both KRAKATAU STEEL and Vale SA 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 KRAKATAU STEEL and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KRAKATAU STEEL B and Vale SA, you can compare the effects of market volatilities on KRAKATAU STEEL and Vale SA 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 KRAKATAU STEEL with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of KRAKATAU STEEL and Vale SA.

Diversification Opportunities for KRAKATAU STEEL and Vale SA

-0.38

Correlation Coefficient

KRAKATAU STEEL  Vale SA

Very good diversification

The 3 months correlation between KRAKATAU and Vale is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding KRAKATAU STEEL B and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and KRAKATAU STEEL 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 KRAKATAU STEEL B are associated (or correlated) with Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of KRAKATAU STEEL i.e., KRAKATAU STEEL and Vale SA go up and down completely randomly.

Pair Corralation between KRAKATAU STEEL and Vale SA

If you would invest  0.60  in KRAKATAU STEEL B on September 23, 2024 and sell it today you would earn a total of  0.00  from holding KRAKATAU STEEL B or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

KRAKATAU STEEL B   vs.  Vale SA

KRAKATAU STEEL B

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in KRAKATAU STEEL B are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward-looking signals, KRAKATAU STEEL unveiled solid returns over the last few months and may actually be approaching a breakup point.

Vale SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vale SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Vale SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KRAKATAU STEEL and Vale SA

The main advantage of trading using opposite KRAKATAU STEEL and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KRAKATAU STEEL position performs unexpectedly, Vale SA 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 Vale SA will offset losses from the drop in Vale SA's long position.

The idea behind KRAKATAU STEEL B and Vale SA 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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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.