Correlation Between Vale SA and Repsol
Can any of the company-specific risk be diversified away by investing in both Vale SA and Repsol 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 Repsol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Repsol, you can compare the effects of market volatilities on Vale SA and Repsol 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 Repsol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Repsol.
Diversification Opportunities for Vale SA and Repsol
Good diversification
The 3 months correlation between Vale and Repsol is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Repsol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repsol 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 Repsol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repsol has no effect on the direction of Vale SA i.e., Vale SA and Repsol go up and down completely randomly.
Pair Corralation between Vale SA and Repsol
Assuming the 90 days trading horizon Vale SA is expected to generate 1.67 times more return on investment than Repsol. However, Vale SA is 1.67 times more volatile than Repsol. It trades about -0.01 of its potential returns per unit of risk. Repsol is currently generating about -0.01 per unit of risk. If you would invest 938.00 in Vale SA on November 2, 2024 and sell it today you would lose (26.00) from holding Vale SA or give up 2.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.06% |
| Values | Daily Returns |
Vale SA vs. Repsol
Performance |
| Timeline |
| Vale SA |
| Repsol |
Vale SA and Repsol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Repsol
The main advantage of trading using opposite Vale SA and Repsol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Repsol 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 Repsol will offset losses from the drop in Repsol's long position.| Vale SA vs. Ebro Foods | Vale SA vs. Inhome Prime Properties | Vale SA vs. Melia Hotels | Vale SA vs. Borges Agricultural Industrial |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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