Correlation Between Vale SA and MGIC INVESTMENT

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

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

Diversification Opportunities for Vale SA and MGIC INVESTMENT

0.03

Correlation Coefficient

Vale SA  MGIC INVESTMENT

Significant diversification

The 3 months correlation between Vale and MGIC is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and MGIC INVESTMENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGIC INVESTMENT 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 MGIC INVESTMENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGIC INVESTMENT has no effect on the direction of Vale SA i.e., Vale SA and MGIC INVESTMENT go up and down completely randomly.

Pair Corralation between Vale SA and MGIC INVESTMENT

Assuming the 90 days trading horizon Vale SA is expected to generate 3.2 times less return on investment than MGIC INVESTMENT. In addition to that, Vale SA is 1.26 times more volatile than MGIC INVESTMENT. It trades about 0.02 of its total potential returns per unit of risk. MGIC INVESTMENT is currently generating about 0.08 per unit of volatility. If you would invest  2,030  in MGIC INVESTMENT on April 20, 2025 and sell it today you would earn a total of  130.00  from holding MGIC INVESTMENT or generate 6.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Vale SA  vs.  MGIC INVESTMENT

Vale SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Vale SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

MGIC INVESTMENT

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MGIC INVESTMENT are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental indicators, MGIC INVESTMENT may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Vale SA and MGIC INVESTMENT

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

The idea behind Vale SA and MGIC INVESTMENT 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.