Correlation Between Vale SA and CITIC RESHLDGS

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

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

Diversification Opportunities for Vale SA and CITIC RESHLDGS

0.78

Correlation Coefficient

Vale SA  CITIC RESHLDGS

Poor diversification

The 3 months correlation between Vale and CITIC is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and CITIC RESHLDGS HD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITIC RESHLDGS HD 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 CITIC RESHLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITIC RESHLDGS HD has no effect on the direction of Vale SA i.e., Vale SA and CITIC RESHLDGS go up and down completely randomly.

Pair Corralation between Vale SA and CITIC RESHLDGS

Assuming the 90 days trading horizon Vale SA is expected to generate 0.72 times more return on investment than CITIC RESHLDGS. However, Vale SA is 1.39 times less risky than CITIC RESHLDGS. It trades about -0.07 of its potential returns per unit of risk. CITIC RESHLDGS HD is currently generating about -0.18 per unit of risk. If you would invest  899.00  in Vale SA on October 10, 2024 and sell it today you would lose (19.00) from holding Vale SA or give up 2.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

Vale SA  vs.  CITIC RESHLDGS HD

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 latest uncertain performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CITIC RESHLDGS HD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITIC RESHLDGS HD 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 basic 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 CITIC RESHLDGS

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

The idea behind Vale SA and CITIC RESHLDGS HD 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.