Correlation Between Vale SA and Vanguard Funds

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

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

Diversification Opportunities for Vale SA and Vanguard Funds

-0.33

Correlation Coefficient

Vale SA  Vanguard Funds

Very good diversification

The 3 months correlation between Vale and Vanguard is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Vanguard Funds Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Funds Public 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 Vanguard Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Funds Public has no effect on the direction of Vale SA i.e., Vale SA and Vanguard Funds go up and down completely randomly.

Pair Corralation between Vale SA and Vanguard Funds

Assuming the 90 days trading horizon Vale SA is expected to generate 1.59 times more return on investment than Vanguard Funds. However, Vale SA is 1.59 times more volatile than Vanguard Funds Public. It trades about 0.13 of its potential returns per unit of risk. Vanguard Funds Public is currently generating about -0.1 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	100.0%
Values	Daily Returns

Vale SA  vs.  Vanguard Funds Public

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.

Vanguard Funds Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vanguard Funds Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Etf's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the Exchange Traded Fund stockholders.

Pair Trading with Vale SA and Vanguard Funds

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

The idea behind Vale SA and Vanguard Funds Public 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.