Correlation Between Vale SA and Superior Plus

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

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

Diversification Opportunities for Vale SA and Superior Plus

0.41

Correlation Coefficient

Vale SA  Superior Plus

Very weak diversification

The 3 months correlation between Vale and Superior is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Superior Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Plus Corp 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 Superior Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Plus Corp has no effect on the direction of Vale SA i.e., Vale SA and Superior Plus go up and down completely randomly.

Pair Corralation between Vale SA and Superior Plus

Assuming the 90 days trading horizon Vale SA is expected to generate 0.71 times more return on investment than Superior Plus. However, Vale SA is 1.42 times less risky than Superior Plus. It trades about -0.03 of its potential returns per unit of risk. Superior Plus Corp is currently generating about -0.05 per unit of risk. If you would invest  935.00  in Vale SA on September 15, 2024 and sell it today you would lose (61.00) from holding Vale SA or give up 6.52% of portfolio value over 90 days.

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

Vale SA  vs.  Superior Plus Corp

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Superior Plus Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Vale SA and Superior Plus

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

The idea behind Vale SA and Superior Plus Corp 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.