Correlation Between Vale SA and Banco Alfa

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

Diversification Opportunities for Vale SA and Banco Alfa

0.0

Correlation Coefficient

Vale SA  Banco Alfa

Pay attention - limited upside

The 3 months correlation between Vale and Banco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Banco Alfa de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Alfa de 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 Alfa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Alfa de has no effect on the direction of Vale SA i.e., Vale SA and Banco Alfa go up and down completely randomly.

Pair Corralation between Vale SA and Banco Alfa

If you would invest  1,254  in Banco Alfa de on September 17, 2024 and sell it today you would earn a total of  0.00  from holding Banco Alfa de or generate 0.0% return on investment over 90 days.

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

Vale SA  vs.  Banco Alfa de

Vale SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vale SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vale SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Banco Alfa de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Banco Alfa de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Banco Alfa is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Vale SA and Banco Alfa

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

The idea behind Vale SA and Banco Alfa de 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.