Correlation Between Vale SA and Fundamental Income

Can any of the company-specific risk be diversified away by investing in both Vale SA and Fundamental Income 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 Fundamental Income 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 Fundamental Income Net, you can compare the effects of market volatilities on Vale SA and Fundamental Income 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 Fundamental Income. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Fundamental Income.

Diversification Opportunities for Vale SA and Fundamental Income

0.68

Correlation Coefficient

Vale SA  Fundamental Income

Poor diversification

The 3 months correlation between Vale and Fundamental is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Fundamental Income Net in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fundamental Income Net 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 Fundamental Income. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fundamental Income Net has no effect on the direction of Vale SA i.e., Vale SA and Fundamental Income go up and down completely randomly.

Pair Corralation between Vale SA and Fundamental Income

Given the investment horizon of 90 days Vale SA is expected to generate 2.33 times less return on investment than Fundamental Income. In addition to that, Vale SA is 1.64 times more volatile than Fundamental Income Net. It trades about 0.01 of its total potential returns per unit of risk. Fundamental Income Net is currently generating about 0.05 per unit of volatility. If you would invest  1,859  in Fundamental Income Net on July 16, 2025 and sell it today you would earn a total of  555.00  from holding Fundamental Income Net or generate 29.85% return on investment over 90 days.

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

Vale SA ADR  vs.  Fundamental Income Net

Vale SA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Vale SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fundamental Income Net

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fundamental Income Net are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Fundamental Income is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Vale SA and Fundamental Income

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

The idea behind Vale SA ADR and Fundamental Income Net 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.