Correlation Between Grupo Carso and Vale SA

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

By analyzing existing cross correlation between Grupo Carso SAB and Vale SA, you can compare the effects of market volatilities on Grupo Carso and Vale SA 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 Grupo Carso with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grupo Carso and Vale SA.

Diversification Opportunities for Grupo Carso and Vale SA

0.63

Correlation Coefficient

Grupo Carso  Vale SA

Poor diversification

The 3 months correlation between Grupo and Vale is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Carso SAB and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Grupo Carso 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 Grupo Carso SAB are associated (or correlated) with Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Grupo Carso i.e., Grupo Carso and Vale SA go up and down completely randomly.

Pair Corralation between Grupo Carso and Vale SA

Assuming the 90 days trading horizon Grupo Carso SAB is expected to generate 0.91 times more return on investment than Vale SA. However, Grupo Carso SAB is 1.1 times less risky than Vale SA. It trades about -0.07 of its potential returns per unit of risk. Vale SA is currently generating about -0.14 per unit of risk. If you would invest  12,232  in Grupo Carso SAB on October 7, 2024 and sell it today you would lose (1,017) from holding Grupo Carso SAB or give up 8.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.55%
Values	Daily Returns

Grupo Carso SAB  vs.  Vale SA

Grupo Carso SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Carso SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Grupo Carso and Vale SA

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

The idea behind Grupo Carso SAB and Vale SA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.