Correlation Between MOLSON COORS and Vale SA

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

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

Diversification Opportunities for MOLSON COORS and Vale SA

-0.4

Correlation Coefficient

MOLSON COORS  Vale SA

Very good diversification

The 3 months correlation between MOLSON and Vale is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding MOLSON RS BEVERAGE and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and MOLSON COORS 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 MOLSON RS BEVERAGE 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 MOLSON COORS i.e., MOLSON COORS and Vale SA go up and down completely randomly.

Pair Corralation between MOLSON COORS and Vale SA

Assuming the 90 days trading horizon MOLSON RS BEVERAGE is expected to generate 1.01 times more return on investment than Vale SA. However, MOLSON COORS is 1.01 times more volatile than Vale SA. It trades about -0.1 of its potential returns per unit of risk. Vale SA is currently generating about -0.39 per unit of risk. If you would invest  5,550  in MOLSON RS BEVERAGE on October 10, 2024 and sell it today you would lose (150.00) from holding MOLSON RS BEVERAGE or give up 2.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

MOLSON RS BEVERAGE  vs.  Vale SA

MOLSON RS BEVERAGE

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MOLSON RS BEVERAGE are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, MOLSON COORS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 fragile performance in the last few months, the Stock's essential 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 MOLSON COORS and Vale SA

The main advantage of trading using opposite MOLSON COORS and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MOLSON COORS 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 MOLSON RS BEVERAGE 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.