Correlation Between Klabin SA and Vale SA

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

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

Diversification Opportunities for Klabin SA and Vale SA

-0.32

Correlation Coefficient

Klabin SA  Vale SA

Very good diversification

The 3 months correlation between Klabin and Vale is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Klabin SA and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Klabin 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 Klabin SA 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 Klabin SA i.e., Klabin SA and Vale SA go up and down completely randomly.

Pair Corralation between Klabin SA and Vale SA

Assuming the 90 days trading horizon Klabin SA is expected to generate 0.66 times more return on investment than Vale SA. However, Klabin SA is 1.52 times less risky than Vale SA. It trades about 0.03 of its potential returns per unit of risk. Vale SA is currently generating about -0.02 per unit of risk. If you would invest  1,902  in Klabin SA on September 3, 2024 and sell it today you would earn a total of  335.00  from holding Klabin SA or generate 17.61% return on investment over 90 days.

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

Klabin SA  vs.  Vale SA

Klabin SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Klabin SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Klabin SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Vale SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vale SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Klabin SA and Vale SA

The main advantage of trading using opposite Klabin SA and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Klabin SA 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 Klabin SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .