Correlation Between Vale SA and SIVERS SEMICONDUCTORS

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

By analyzing existing cross correlation between Vale SA and SIVERS SEMICONDUCTORS AB, you can compare the effects of market volatilities on Vale SA and SIVERS SEMICONDUCTORS 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 SIVERS SEMICONDUCTORS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and SIVERS SEMICONDUCTORS.

Diversification Opportunities for Vale SA and SIVERS SEMICONDUCTORS

0.36

Correlation Coefficient

Vale SA  SIVERS SEMICONDUCTORS

Weak diversification

The 3 months correlation between Vale and SIVERS is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and SIVERS SEMICONDUCTORS AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIVERS SEMICONDUCTORS 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 SIVERS SEMICONDUCTORS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIVERS SEMICONDUCTORS has no effect on the direction of Vale SA i.e., Vale SA and SIVERS SEMICONDUCTORS go up and down completely randomly.

Pair Corralation between Vale SA and SIVERS SEMICONDUCTORS

Assuming the 90 days trading horizon Vale SA is expected to generate 2.85 times less return on investment than SIVERS SEMICONDUCTORS. But when comparing it to its historical volatility, Vale SA is 4.45 times less risky than SIVERS SEMICONDUCTORS. It trades about 0.14 of its potential returns per unit of risk. SIVERS SEMICONDUCTORS AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  28.00  in SIVERS SEMICONDUCTORS AB on December 26, 2024 and sell it today you would earn a total of  8.00  from holding SIVERS SEMICONDUCTORS AB or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Vale SA  vs.  SIVERS SEMICONDUCTORS AB

Vale SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Vale SA reported solid returns over the last few months and may actually be approaching a breakup point.

SIVERS SEMICONDUCTORS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIVERS SEMICONDUCTORS AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SIVERS SEMICONDUCTORS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vale SA and SIVERS SEMICONDUCTORS

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

The idea behind Vale SA and SIVERS SEMICONDUCTORS AB 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..