Correlation Between Caixabank and Vale SA

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

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

Diversification Opportunities for Caixabank and Vale SA

-0.02

Correlation Coefficient

Caixabank  Vale SA

Good diversification

The 3 months correlation between Caixabank and Vale is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Caixabank 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 Caixabank SA are associated (or correlated) with Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA has no effect on the direction of Caixabank i.e., Caixabank and Vale SA go up and down completely randomly.

Pair Corralation between Caixabank and Vale SA

Assuming the 90 days trading horizon Caixabank is expected to generate 2.79 times less return on investment than Vale SA. But when comparing it to its historical volatility, Caixabank SA is 1.08 times less risky than Vale SA. It trades about 0.0 of its potential returns per unit of risk. Vale SA is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  957.00  in Vale SA on September 5, 2024 and sell it today you would lose (3.00) from holding Vale SA or give up 0.31% of portfolio value over 90 days.

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

Caixabank SA  vs.  Vale SA

Caixabank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caixabank SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Caixabank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vale SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vale SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Vale SA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Caixabank and Vale SA

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

The idea behind Caixabank SA and Vale SA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.