Correlation Between Vale SA and Suzano SA

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

Diversification Opportunities for Vale SA and Suzano SA

-0.29

Correlation Coefficient

Vale SA  Suzano SA

Very good diversification

The 3 months correlation between Vale and Suzano is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Suzano SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suzano 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 Suzano SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suzano SA has no effect on the direction of Vale SA i.e., Vale SA and Suzano SA go up and down completely randomly.

Pair Corralation between Vale SA and Suzano SA

Assuming the 90 days trading horizon Vale SA is expected to generate 1.06 times more return on investment than Suzano SA. However, Vale SA is 1.06 times more volatile than Suzano SA. It trades about -0.02 of its potential returns per unit of risk. Suzano SA is currently generating about -0.12 per unit of risk. If you would invest  5,683  in Vale SA on December 4, 2024 and sell it today you would lose (168.00) from holding Vale SA or give up 2.96% of portfolio value over 90 days.

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

Vale SA  vs.  Suzano SA

Vale SA

Risk-Adjusted Performance

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Suzano SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Suzano SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Vale SA and Suzano SA

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

The idea behind Vale SA and Suzano 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.