Correlation Between Vale SA and Hastings Technology

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

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

Diversification Opportunities for Vale SA and Hastings Technology

-0.04

Correlation Coefficient

Vale SA  Hastings Technology

Good diversification

The 3 months correlation between Vale and Hastings is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Hastings Technology Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hastings Technology 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 Hastings Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hastings Technology has no effect on the direction of Vale SA i.e., Vale SA and Hastings Technology go up and down completely randomly.

Pair Corralation between Vale SA and Hastings Technology

Assuming the 90 days trading horizon Vale SA is expected to generate 0.32 times more return on investment than Hastings Technology. However, Vale SA is 3.09 times less risky than Hastings Technology. It trades about 0.13 of its potential returns per unit of risk. Hastings Technology Metals is currently generating about 0.01 per unit of risk. If you would invest  819.00  in Vale SA on December 29, 2024 and sell it today you would earn a total of  105.00  from holding Vale SA or generate 12.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Vale SA  vs.  Hastings Technology Metals

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 fragile essential indicators, Vale SA reported solid returns over the last few months and may actually be approaching a breakup point.

Hastings Technology

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Vale SA and Hastings Technology

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

The idea behind Vale SA and Hastings Technology Metals 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.