Correlation Between Vale SA and Banco De

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

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

Diversification Opportunities for Vale SA and Banco De

-0.66

Correlation Coefficient

Vale SA  Banco De

Excellent diversification

The 3 months correlation between Vale and Banco is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Banco de Valores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco de Valores and Vale 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 Vale SA are associated (or correlated) with Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco de Valores has no effect on the direction of Vale SA i.e., Vale SA and Banco De go up and down completely randomly.

Pair Corralation between Vale SA and Banco De

Assuming the 90 days trading horizon Vale SA is expected to generate 1.25 times more return on investment than Banco De. However, Vale SA is 1.25 times more volatile than Banco de Valores. It trades about 0.19 of its potential returns per unit of risk. Banco de Valores is currently generating about -0.34 per unit of risk. If you would invest  528,000  in Vale SA on December 30, 2024 and sell it today you would earn a total of  129,000  from holding Vale SA or generate 24.43% return on investment over 90 days.

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

Vale SA  vs.  Banco de Valores

Vale SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Vale SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Banco de Valores

Risk-Adjusted Performance

Very Weak

Over the last 90 days Banco de Valores has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vale SA and Banco De

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

The idea behind Vale SA and Banco de Valores 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.