Correlation Between OPERA SOFTWARE and Vale SA

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

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

Diversification Opportunities for OPERA SOFTWARE and Vale SA

0.31

Correlation Coefficient

OPERA SOFTWARE  Vale SA

Weak diversification

The 3 months correlation between OPERA and Vale is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding OPERA SOFTWARE and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and OPERA SOFTWARE 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 OPERA SOFTWARE 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 OPERA SOFTWARE i.e., OPERA SOFTWARE and Vale SA go up and down completely randomly.

Pair Corralation between OPERA SOFTWARE and Vale SA

Assuming the 90 days trading horizon OPERA SOFTWARE is expected to generate 43.75 times less return on investment than Vale SA. But when comparing it to its historical volatility, OPERA SOFTWARE is 1.03 times less risky than Vale SA. It trades about 0.0 of its potential returns per unit of risk. Vale SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  650.00  in Vale SA on October 25, 2024 and sell it today you would earn a total of  234.00  from holding Vale SA or generate 36.0% return on investment over 90 days.

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

OPERA SOFTWARE  vs.  Vale SA

OPERA SOFTWARE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OPERA SOFTWARE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, OPERA SOFTWARE is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private 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. Despite latest fragile 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.

Pair Trading with OPERA SOFTWARE and Vale SA

The main advantage of trading using opposite OPERA SOFTWARE and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OPERA SOFTWARE 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 OPERA SOFTWARE 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.