Correlation Between Vale SA and Grupo Ecoener

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

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

Diversification Opportunities for Vale SA and Grupo Ecoener

-0.32

Correlation Coefficient

Vale SA  Grupo Ecoener

Very good diversification

The 3 months correlation between Vale and Grupo is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Grupo Ecoener SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grupo Ecoener 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 Grupo Ecoener. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grupo Ecoener SA has no effect on the direction of Vale SA i.e., Vale SA and Grupo Ecoener go up and down completely randomly.

Pair Corralation between Vale SA and Grupo Ecoener

Assuming the 90 days trading horizon Vale SA is expected to generate 2.49 times more return on investment than Grupo Ecoener. However, Vale SA is 2.49 times more volatile than Grupo Ecoener SA. It trades about 0.07 of its potential returns per unit of risk. Grupo Ecoener SA is currently generating about 0.03 per unit of risk. If you would invest  840.00  in Vale SA on December 30, 2024 and sell it today you would earn a total of  106.00  from holding Vale SA or generate 12.62% 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.  Grupo Ecoener SA

Vale SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Vale SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Grupo Ecoener SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grupo Ecoener SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Grupo Ecoener is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vale SA and Grupo Ecoener

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

The idea behind Vale SA and Grupo Ecoener 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.