Correlation Between Berkeley Energia and Vale SA

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

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

Diversification Opportunities for Berkeley Energia and Vale SA

-0.37

Correlation Coefficient

Berkeley Energia  Vale SA

Very good diversification

The 3 months correlation between Berkeley and Vale is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Berkeley Energia Limited and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Berkeley Energia 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 Berkeley Energia Limited 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 Berkeley Energia i.e., Berkeley Energia and Vale SA go up and down completely randomly.

Pair Corralation between Berkeley Energia and Vale SA

Assuming the 90 days trading horizon Berkeley Energia is expected to generate 4.72 times less return on investment than Vale SA. In addition to that, Berkeley Energia is 2.37 times more volatile than Vale SA. It trades about 0.0 of its total potential returns per unit of risk. Vale SA is currently generating about 0.04 per unit of volatility. If you would invest  862.00  in Vale SA on April 23, 2025 and sell it today you would earn a total of  24.00  from holding Vale SA or generate 2.78% return on investment over 90 days.

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

Berkeley Energia Limited  vs.  Vale SA

Berkeley Energia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Berkeley Energia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Berkeley Energia is not utilizing all of its potentials. The recent 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 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Berkeley Energia and Vale SA

The main advantage of trading using opposite Berkeley Energia and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Berkeley Energia 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 Berkeley Energia Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.