Correlation Between Vale SA and Mapfre

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

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

Diversification Opportunities for Vale SA and Mapfre

-0.29

Correlation Coefficient

Vale SA  Mapfre

Very good diversification

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

Pair Corralation between Vale SA and Mapfre

Assuming the 90 days trading horizon Vale SA is expected to under-perform the Mapfre. In addition to that, Vale SA is 1.49 times more volatile than Mapfre. It trades about -0.06 of its total potential returns per unit of risk. Mapfre is currently generating about 0.12 per unit of volatility. If you would invest  210.00  in Mapfre on September 14, 2024 and sell it today you would earn a total of  40.00  from holding Mapfre or generate 19.05% 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.  Mapfre

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 very healthy primary indicators, Vale SA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Mapfre

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mapfre are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Mapfre may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vale SA and Mapfre

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

The idea behind Vale SA and Mapfre 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 CEOs Directory module to screen CEOs from public companies around the world.