Correlation Between Compaa Minera and Vale SA

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

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

Diversification Opportunities for Compaa Minera and Vale SA

0.47

Correlation Coefficient

Compaa Minera  Vale SA

Very weak diversification

The 3 months correlation between Compaa and Vale is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Compaa Minera Autln and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Compaa Minera 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 Compaa Minera Autln 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 Compaa Minera i.e., Compaa Minera and Vale SA go up and down completely randomly.

Pair Corralation between Compaa Minera and Vale SA

Assuming the 90 days trading horizon Compaa Minera Autln is expected to under-perform the Vale SA. But the stock apears to be less risky and, when comparing its historical volatility, Compaa Minera Autln is 1.18 times less risky than Vale SA. The stock trades about -0.07 of its potential returns per unit of risk. The Vale SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  20,840  in Vale SA on September 24, 2024 and sell it today you would lose (2,640) from holding Vale SA or give up 12.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.06%
Values	Daily Returns

Compaa Minera Autln  vs.  Vale SA

Compaa Minera Autln

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compaa Minera Autln has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Compaa Minera and Vale SA

The main advantage of trading using opposite Compaa Minera and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compaa Minera 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 Compaa Minera Autln 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..