Correlation Between Vale SA and Industrias Penoles

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

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

Diversification Opportunities for Vale SA and Industrias Penoles

0.77

Correlation Coefficient

Vale SA  Industrias Penoles

Poor diversification

The 3 months correlation between Vale and Industrias is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Industrias Penoles Sab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias Penoles Sab 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 Industrias Penoles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias Penoles Sab has no effect on the direction of Vale SA i.e., Vale SA and Industrias Penoles go up and down completely randomly.

Pair Corralation between Vale SA and Industrias Penoles

Assuming the 90 days trading horizon Vale SA is expected to generate 3.55 times less return on investment than Industrias Penoles. But when comparing it to its historical volatility, Vale SA is 2.45 times less risky than Industrias Penoles. It trades about 0.1 of its potential returns per unit of risk. Industrias Penoles Sab is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,260  in Industrias Penoles Sab on December 29, 2024 and sell it today you would earn a total of  430.00  from holding Industrias Penoles Sab or generate 34.13% return on investment over 90 days.

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

Vale SA  vs.  Industrias Penoles Sab

Vale SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Vale SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Industrias Penoles Sab

Risk-Adjusted Performance

Good

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

Pair Trading with Vale SA and Industrias Penoles

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

The idea behind Vale SA and Industrias Penoles Sab 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.