Correlation Between Vale SA and Arrienda Rental

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

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

Diversification Opportunities for Vale SA and Arrienda Rental

-0.3

Correlation Coefficient

Vale SA  Arrienda Rental

Very good diversification

The 3 months correlation between Vale and Arrienda is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Arrienda Rental Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrienda Rental Prop 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 Arrienda Rental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrienda Rental Prop has no effect on the direction of Vale SA i.e., Vale SA and Arrienda Rental go up and down completely randomly.

Pair Corralation between Vale SA and Arrienda Rental

Assuming the 90 days trading horizon Vale SA is expected to generate 22.79 times more return on investment than Arrienda Rental. However, Vale SA is 22.79 times more volatile than Arrienda Rental Properties. It trades about 0.01 of its potential returns per unit of risk. Arrienda Rental Properties is currently generating about 0.12 per unit of risk. If you would invest  957.00  in Vale SA on September 5, 2024 and sell it today you would lose (3.00) from holding Vale SA or give up 0.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Vale SA  vs.  Arrienda Rental Properties

Vale SA

Risk-Adjusted Performance

0 of 100

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.

Arrienda Rental Prop

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arrienda Rental Properties are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Arrienda Rental 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 Arrienda Rental

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

The idea behind Vale SA and Arrienda Rental Properties 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.