Correlation Between Vale SA and Covenant Logistics
Can any of the company-specific risk be diversified away by investing in both Vale SA and Covenant Logistics 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 Covenant Logistics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA ADR and Covenant Logistics Group, you can compare the effects of market volatilities on Vale SA and Covenant Logistics 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 Covenant Logistics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Covenant Logistics.
Diversification Opportunities for Vale SA and Covenant Logistics
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vale and Covenant is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Covenant Logistics Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Covenant Logistics 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 ADR are associated (or correlated) with Covenant Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Covenant Logistics has no effect on the direction of Vale SA i.e., Vale SA and Covenant Logistics go up and down completely randomly.
Pair Corralation between Vale SA and Covenant Logistics
Given the investment horizon of 90 days Vale SA ADR is expected to generate 0.17 times more return on investment than Covenant Logistics. However, Vale SA ADR is 5.81 times less risky than Covenant Logistics. It trades about -0.18 of its potential returns per unit of risk. Covenant Logistics Group is currently generating about -0.28 per unit of risk. If you would invest 959.00 in Vale SA ADR on October 4, 2024 and sell it today you would lose (72.00) from holding Vale SA ADR or give up 7.51% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 85.71% |
Values | Daily Returns |
Vale SA ADR vs. Covenant Logistics Group
Performance |
Timeline |
Vale SA ADR |
Covenant Logistics |
Vale SA and Covenant Logistics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vale SA and Covenant Logistics
The main advantage of trading using opposite Vale SA and Covenant Logistics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Covenant Logistics 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 Covenant Logistics will offset losses from the drop in Covenant Logistics' long position.Vale SA vs. BHP Group Limited | Vale SA vs. Teck Resources Ltd | Vale SA vs. Lithium Americas Corp | Vale SA vs. MP Materials Corp |
Covenant Logistics vs. Fukuyama Transporting Co | Covenant Logistics vs. NMI Holdings | Covenant Logistics vs. SIVERS SEMICONDUCTORS AB | Covenant Logistics vs. Talanx AG |
Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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