Correlation Between SCIENCE IN and Vale SA

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

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

Diversification Opportunities for SCIENCE IN and Vale SA

0.63

Correlation Coefficient

SCIENCE IN  Vale SA

Poor diversification

The 3 months correlation between SCIENCE and Vale is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding SCIENCE IN SPORT and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and SCIENCE IN 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 SCIENCE IN SPORT 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 SCIENCE IN i.e., SCIENCE IN and Vale SA go up and down completely randomly.

Pair Corralation between SCIENCE IN and Vale SA

Assuming the 90 days horizon SCIENCE IN SPORT is expected to generate 2.42 times more return on investment than Vale SA. However, SCIENCE IN is 2.42 times more volatile than Vale SA. It trades about 0.06 of its potential returns per unit of risk. Vale SA is currently generating about 0.13 per unit of risk. If you would invest  29.00  in SCIENCE IN SPORT on December 20, 2024 and sell it today you would earn a total of  3.00  from holding SCIENCE IN SPORT or generate 10.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

SCIENCE IN SPORT  vs.  Vale SA

SCIENCE IN SPORT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SCIENCE IN SPORT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, SCIENCE IN reported solid returns over the last few months and may actually be approaching a breakup point.

Vale SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Vale SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with SCIENCE IN and Vale SA

The main advantage of trading using opposite SCIENCE IN and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCIENCE IN 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 SCIENCE IN SPORT 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.