Correlation Between Vale SA and Inhome Prime

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

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

Diversification Opportunities for Vale SA and Inhome Prime

-0.25

Correlation Coefficient

Vale SA  Inhome Prime

Very good diversification

The 3 months correlation between Vale and Inhome is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Inhome Prime Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inhome Prime Properties 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 Inhome Prime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inhome Prime Properties has no effect on the direction of Vale SA i.e., Vale SA and Inhome Prime go up and down completely randomly.

Pair Corralation between Vale SA and Inhome Prime

Assuming the 90 days trading horizon Vale SA is expected to under-perform the Inhome Prime. In addition to that, Vale SA is 1.35 times more volatile than Inhome Prime Properties. It trades about -0.04 of its total potential returns per unit of risk. Inhome Prime Properties is currently generating about 0.12 per unit of volatility. If you would invest  1,000.00  in Inhome Prime Properties on September 16, 2024 and sell it today you would earn a total of  120.00  from holding Inhome Prime Properties or generate 12.0% 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.  Inhome Prime Properties

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.

Inhome Prime Properties

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inhome Prime Properties are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Inhome Prime may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vale SA and Inhome Prime

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

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