Correlation Between Azaria Rental and Vale SA

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

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

Diversification Opportunities for Azaria Rental and Vale SA

-0.69

Correlation Coefficient

Azaria Rental  Vale SA

Excellent diversification

The 3 months correlation between Azaria and Vale is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Azaria Rental SOCIMI and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Azaria Rental 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 Azaria Rental SOCIMI are associated (or correlated) with Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Azaria Rental i.e., Azaria Rental and Vale SA go up and down completely randomly.

Pair Corralation between Azaria Rental and Vale SA

Assuming the 90 days trading horizon Azaria Rental SOCIMI is expected to under-perform the Vale SA. But the stock apears to be less risky and, when comparing its historical volatility, Azaria Rental SOCIMI is 8.23 times less risky than Vale SA. The stock trades about -0.11 of its potential returns per unit of risk. The Vale SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  857.00  in Vale SA on December 24, 2024 and sell it today you would earn a total of  95.00  from holding Vale SA or generate 11.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Azaria Rental SOCIMI  vs.  Vale SA

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.

Vale SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 4 (%) 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.

Pair Trading with Azaria Rental and Vale SA

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

The idea behind Azaria Rental SOCIMI and Vale 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.