Correlation Between Vale SA and Eternit SA

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

Diversification Opportunities for Vale SA and Eternit SA

0.05

Correlation Coefficient

Vale SA  Eternit SA

Significant diversification

The 3 months correlation between Vale and Eternit is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Eternit SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternit 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 Eternit SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternit SA has no effect on the direction of Vale SA i.e., Vale SA and Eternit SA go up and down completely randomly.

Pair Corralation between Vale SA and Eternit SA

Assuming the 90 days trading horizon Vale SA is expected to generate 0.99 times more return on investment than Eternit SA. However, Vale SA is 1.01 times less risky than Eternit SA. It trades about 0.12 of its potential returns per unit of risk. Eternit SA is currently generating about -0.02 per unit of risk. If you would invest  5,247  in Vale SA on December 30, 2024 and sell it today you would earn a total of  509.00  from holding Vale SA or generate 9.7% return on investment over 90 days.

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

Vale SA  vs.  Eternit 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.

Eternit SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eternit SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eternit SA 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 Eternit SA

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

The idea behind Vale SA and Eternit 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.