Correlation Between NORDIC HALIBUT and Vale SA

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

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

Diversification Opportunities for NORDIC HALIBUT and Vale SA

-0.44

Correlation Coefficient

NORDIC HALIBUT  Vale SA

Very good diversification

The 3 months correlation between NORDIC and Vale is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding NORDIC HALIBUT AS and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and NORDIC HALIBUT 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 NORDIC HALIBUT AS 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 NORDIC HALIBUT i.e., NORDIC HALIBUT and Vale SA go up and down completely randomly.

Pair Corralation between NORDIC HALIBUT and Vale SA

Assuming the 90 days horizon NORDIC HALIBUT AS is expected to generate 0.64 times more return on investment than Vale SA. However, NORDIC HALIBUT AS is 1.56 times less risky than Vale SA. It trades about 0.19 of its potential returns per unit of risk. Vale SA is currently generating about 0.01 per unit of risk. If you would invest  157.00  in NORDIC HALIBUT AS on December 5, 2024 and sell it today you would earn a total of  6.00  from holding NORDIC HALIBUT AS or generate 3.82% return on investment over 90 days.

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

NORDIC HALIBUT AS  vs.  Vale SA

NORDIC HALIBUT AS

Risk-Adjusted Performance

Very Weak

Over the last 90 days NORDIC HALIBUT AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, NORDIC HALIBUT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Vale SA

Risk-Adjusted Performance

Weak

Over the last 90 days Vale SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Vale SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NORDIC HALIBUT and Vale SA

The main advantage of trading using opposite NORDIC HALIBUT and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NORDIC HALIBUT 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 NORDIC HALIBUT AS 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.