Correlation Between Vale SA and Banco Bilbao
Can any of the company-specific risk be diversified away by investing in both Vale SA and Banco Bilbao 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 Banco Bilbao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Banco Bilbao Vizcaya, you can compare the effects of market volatilities on Vale SA and Banco Bilbao 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 Banco Bilbao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Banco Bilbao.
Diversification Opportunities for Vale SA and Banco Bilbao
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vale and Banco is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Banco Bilbao Vizcaya in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Bilbao Vizcaya 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 Banco Bilbao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Bilbao Vizcaya has no effect on the direction of Vale SA i.e., Vale SA and Banco Bilbao go up and down completely randomly.
Pair Corralation between Vale SA and Banco Bilbao
Assuming the 90 days trading horizon Vale SA is expected to under-perform the Banco Bilbao. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA is 1.06 times less risky than Banco Bilbao. The stock trades about -0.14 of its potential returns per unit of risk. The Banco Bilbao Vizcaya is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 906.00 in Banco Bilbao Vizcaya on August 27, 2024 and sell it today you would earn a total of 11.00 from holding Banco Bilbao Vizcaya or generate 1.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Banco Bilbao Vizcaya
Performance |
| Timeline |
| Vale SA |
| Banco Bilbao Vizcaya |
Vale SA and Banco Bilbao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Banco Bilbao
The main advantage of trading using opposite Vale SA and Banco Bilbao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Banco Bilbao 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 Banco Bilbao will offset losses from the drop in Banco Bilbao's long position.| Vale SA vs. Squirrel Media SA | Vale SA vs. Labiana Health SA | Vale SA vs. Tier1 Technology SA | Vale SA vs. Inhome Prime Properties |
| Banco Bilbao vs. Banco Santander | Banco Bilbao vs. Repsol | Banco Bilbao vs. Telefonica | Banco Bilbao vs. Iberdrola SA |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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