Correlation Between Vale SA and Minerva SA

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

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

Diversification Opportunities for Vale SA and Minerva SA

0.58

Correlation Coefficient

Vale SA  Minerva SA

Very weak diversification

The 3 months correlation between Vale and Minerva is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Minerva SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minerva SA 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 Minerva SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minerva SA has no effect on the direction of Vale SA i.e., Vale SA and Minerva SA go up and down completely randomly.

Pair Corralation between Vale SA and Minerva SA

Assuming the 90 days trading horizon Vale SA is expected to generate 2.38 times less return on investment than Minerva SA. But when comparing it to its historical volatility, Vale SA is 2.5 times less risky than Minerva SA. It trades about 0.12 of its potential returns per unit of risk. Minerva SA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  509.00  in Minerva SA on December 30, 2024 and sell it today you would earn a total of  112.00  from holding Minerva SA or generate 22.0% return on investment over 90 days.

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

Vale SA  vs.  Minerva SA

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.

Minerva SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Minerva SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Minerva SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vale SA and Minerva SA

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

The idea behind Vale SA and Minerva 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.