Correlation Between Vale SA and Azaria Rental

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

Diversification Opportunities for Vale SA and Azaria Rental

-0.7

Correlation Coefficient

Vale SA  Azaria Rental

Excellent diversification

The 3 months correlation between Vale and Azaria is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Azaria Rental SOCIMI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azaria Rental SOCIMI 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 Azaria Rental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azaria Rental SOCIMI has no effect on the direction of Vale SA i.e., Vale SA and Azaria Rental go up and down completely randomly.

Pair Corralation between Vale SA and Azaria Rental

Assuming the 90 days trading horizon Vale SA is expected to generate 8.22 times more return on investment than Azaria Rental. However, Vale SA is 8.22 times more volatile than Azaria Rental SOCIMI. It trades about 0.07 of its potential returns per unit of risk. Azaria Rental SOCIMI is currently generating about -0.11 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	Weak
Accuracy	100.0%
Values	Daily Returns

Vale SA  vs.  Azaria Rental SOCIMI

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.

Azaria Rental SOCIMI

Risk-Adjusted Performance

Very Weak

Over the last 90 days Azaria Rental SOCIMI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Azaria 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 Azaria Rental

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

The idea behind Vale SA and Azaria Rental SOCIMI 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.