Correlation Between Vale SA and APPLE

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Can any of the company-specific risk be diversified away by investing in both Vale SA and APPLE 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 APPLE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA ADR and APPLE INC, you can compare the effects of market volatilities on Vale SA and APPLE 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 APPLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and APPLE.

Diversification Opportunities for Vale SA and APPLE

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Vale and APPLE is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and APPLE INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLE INC 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 ADR are associated (or correlated) with APPLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLE INC has no effect on the direction of Vale SA i.e., Vale SA and APPLE go up and down completely randomly.

Pair Corralation between Vale SA and APPLE

Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the APPLE. In addition to that, Vale SA is 2.6 times more volatile than APPLE INC. It trades about -0.24 of its total potential returns per unit of risk. APPLE INC is currently generating about -0.14 per unit of volatility. If you would invest  9,345  in APPLE INC on December 29, 2023 and sell it today you would lose (147.00) from holding APPLE INC or give up 1.57% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Vale SA ADR  vs.  APPLE INC

 Performance 
       Timeline  
Vale SA ADR 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Vale SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
APPLE INC 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days APPLE INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APPLE is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vale SA and APPLE Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vale SA and APPLE

The main advantage of trading using opposite Vale SA and APPLE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, APPLE 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 APPLE will offset losses from the drop in APPLE's long position.
The idea behind Vale SA ADR and APPLE INC 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.
Check out your portfolio center.
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.

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