Correlation Between Vale SA and IBEX 35
Can any of the company-specific risk be diversified away by investing in both Vale SA and IBEX 35 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 IBEX 35 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and IBEX 35 Index, you can compare the effects of market volatilities on Vale SA and IBEX 35 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 IBEX 35. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and IBEX 35.
Diversification Opportunities for Vale SA and IBEX 35
Very weak diversification
The 3 months correlation between Vale and IBEX is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and IBEX 35 Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBEX 35 Index 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 IBEX 35. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBEX 35 Index has no effect on the direction of Vale SA i.e., Vale SA and IBEX 35 go up and down completely randomly.
Pair Corralation between Vale SA and IBEX 35
Assuming the 90 days trading horizon Vale SA is expected to generate 1.79 times less return on investment than IBEX 35. In addition to that, Vale SA is 5.26 times more volatile than IBEX 35 Index. It trades about 0.01 of its total potential returns per unit of risk. IBEX 35 Index is currently generating about 0.08 per unit of volatility. If you would invest 837,010 in IBEX 35 Index on August 26, 2024 and sell it today you would earn a total of 328,650 from holding IBEX 35 Index or generate 39.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 94.31% |
| Values | Daily Returns |
Vale SA vs. IBEX 35 Index
Performance |
| Timeline |
Vale SA and IBEX 35 Volatility Contrast
Predicted Return Density |
| Returns |
Vale SA
Pair trading matchups for Vale SA
IBEX 35 Index
Pair trading matchups for IBEX 35
Pair Trading with Vale SA and IBEX 35
The main advantage of trading using opposite Vale SA and IBEX 35 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, IBEX 35 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 IBEX 35 will offset losses from the drop in IBEX 35's long position.The idea behind Vale SA and IBEX 35 Index 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.| IBEX 35 vs. NH Hoteles | IBEX 35 vs. Atrys Health SL | IBEX 35 vs. Parlem Telecom Companyia | IBEX 35 vs. Technomeca Aerospace 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |