Correlation Between Rumo SA and Vale SA

Can any of the company-specific risk be diversified away by investing in both Rumo 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 Rumo 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 Rumo SA and Vale SA, you can compare the effects of market volatilities on Rumo 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 Rumo SA with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rumo SA and Vale SA.

Diversification Opportunities for Rumo SA and Vale SA

0.05

Correlation Coefficient

Rumo SA  Vale SA

Significant diversification

The 3 months correlation between Rumo and Vale is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Rumo SA and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Rumo 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 Rumo 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 Rumo SA i.e., Rumo SA and Vale SA go up and down completely randomly.

Pair Corralation between Rumo SA and Vale SA

Assuming the 90 days trading horizon Rumo SA is expected to under-perform the Vale SA. In addition to that, Rumo SA is 1.34 times more volatile than Vale SA. It trades about -0.03 of its total potential returns per unit of risk. Vale SA is currently generating about 0.12 per unit of volatility. If you would invest  5,247  in Vale SA on December 30, 2024 and sell it today you would earn a total of  509.00  from holding Vale SA or generate 9.7% return on investment over 90 days.

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

Rumo SA  vs.  Vale SA

Rumo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rumo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rumo SA 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Vale SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Rumo SA and Vale SA

The main advantage of trading using opposite Rumo SA and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rumo 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 Rumo 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.