Correlation Between Vale SA and Scope AI

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

Diversification Opportunities for Vale SA and Scope AI

0.47

Correlation Coefficient

Vale SA  Scope AI

Very weak diversification

The 3 months correlation between Vale and Scope is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Scope AI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scope AI Corp 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 Scope AI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scope AI Corp has no effect on the direction of Vale SA i.e., Vale SA and Scope AI go up and down completely randomly.

Pair Corralation between Vale SA and Scope AI

Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the Scope AI. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA ADR is 4.61 times less risky than Scope AI. The stock trades about -0.18 of its potential returns per unit of risk. The Scope AI Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Scope AI Corp on October 4, 2024 and sell it today you would earn a total of  0.00  from holding Scope AI Corp or generate 0.0% return on investment over 90 days.

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

Vale SA ADR  vs.  Scope AI Corp

Vale SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vale SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Scope AI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scope AI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Scope AI is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vale SA and Scope AI

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

The idea behind Vale SA ADR and Scope AI Corp 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.