Correlation Between Vale SA and Aeris Indstria

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

By analyzing existing cross correlation between Vale SA and Aeris Indstria e, you can compare the effects of market volatilities on Vale SA and Aeris Indstria 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 Aeris Indstria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Aeris Indstria.

Diversification Opportunities for Vale SA and Aeris Indstria

-0.33

Correlation Coefficient

Vale SA  Aeris Indstria

Very good diversification

The 3 months correlation between Vale and Aeris is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Aeris Indstria e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeris Indstria e 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 Aeris Indstria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeris Indstria e has no effect on the direction of Vale SA i.e., Vale SA and Aeris Indstria go up and down completely randomly.

Pair Corralation between Vale SA and Aeris Indstria

Assuming the 90 days trading horizon Vale SA is expected to generate 0.43 times more return on investment than Aeris Indstria. However, Vale SA is 2.32 times less risky than Aeris Indstria. It trades about 0.04 of its potential returns per unit of risk. Aeris Indstria e is currently generating about -0.25 per unit of risk. If you would invest  5,655  in Vale SA on September 3, 2024 and sell it today you would earn a total of  223.00  from holding Vale SA or generate 3.94% return on investment over 90 days.

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

Vale SA  vs.  Aeris Indstria e

Vale SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Vale SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aeris Indstria e

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeris Indstria e has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Vale SA and Aeris Indstria

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

The idea behind Vale SA and Aeris Indstria e 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.