Correlation Between PPHE HOTEL and Vale SA

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

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

Diversification Opportunities for PPHE HOTEL and Vale SA

-0.72

Correlation Coefficient

PPHE HOTEL  Vale SA

Pay attention - limited upside

The 3 months correlation between PPHE and Vale is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding PPHE HOTEL GROUP and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and PPHE HOTEL 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 PPHE HOTEL GROUP 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 PPHE HOTEL i.e., PPHE HOTEL and Vale SA go up and down completely randomly.

Pair Corralation between PPHE HOTEL and Vale SA

Assuming the 90 days trading horizon PPHE HOTEL GROUP is expected to under-perform the Vale SA. In addition to that, PPHE HOTEL is 1.82 times more volatile than Vale SA. It trades about -0.17 of its total potential returns per unit of risk. Vale SA is currently generating about 0.03 per unit of volatility. If you would invest  856.00  in Vale SA on October 22, 2024 and sell it today you would earn a total of  4.00  from holding Vale SA or generate 0.47% return on investment over 90 days.

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

PPHE HOTEL GROUP  vs.  Vale SA

PPHE HOTEL GROUP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PPHE HOTEL GROUP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, PPHE HOTEL may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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. Despite latest unsteady performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PPHE HOTEL and Vale SA

The main advantage of trading using opposite PPHE HOTEL and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPHE HOTEL 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 PPHE HOTEL GROUP 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.