Correlation Between Vale SA and SERI INDUSTRIAL

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

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

Diversification Opportunities for Vale SA and SERI INDUSTRIAL

0.8

Correlation Coefficient

Vale SA  SERI INDUSTRIAL

Very poor diversification

The 3 months correlation between Vale and SERI is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and SERI INDUSTRIAL EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SERI INDUSTRIAL EO 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 SERI INDUSTRIAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SERI INDUSTRIAL EO has no effect on the direction of Vale SA i.e., Vale SA and SERI INDUSTRIAL go up and down completely randomly.

Pair Corralation between Vale SA and SERI INDUSTRIAL

Assuming the 90 days trading horizon Vale SA is expected to generate 0.54 times more return on investment than SERI INDUSTRIAL. However, Vale SA is 1.86 times less risky than SERI INDUSTRIAL. It trades about -0.03 of its potential returns per unit of risk. SERI INDUSTRIAL EO is currently generating about -0.04 per unit of risk. If you would invest  1,297  in Vale SA on October 26, 2024 and sell it today you would lose (431.00) from holding Vale SA or give up 33.23% of portfolio value over 90 days.

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

Vale SA  vs.  SERI INDUSTRIAL EO

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 fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

SERI INDUSTRIAL EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SERI INDUSTRIAL EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vale SA and SERI INDUSTRIAL

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

The idea behind Vale SA and SERI INDUSTRIAL EO 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.

Check out your portfolio center.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.