Correlation Between Arteche Lantegi and Vale SA

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

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

Diversification Opportunities for Arteche Lantegi and Vale SA

-0.43

Correlation Coefficient

Arteche Lantegi  Vale SA

Very good diversification

The 3 months correlation between Arteche and Vale is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Arteche Lantegi Elkartea and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Arteche Lantegi 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 Arteche Lantegi Elkartea 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 Arteche Lantegi i.e., Arteche Lantegi and Vale SA go up and down completely randomly.

Pair Corralation between Arteche Lantegi and Vale SA

Assuming the 90 days trading horizon Arteche Lantegi is expected to generate 2.73 times less return on investment than Vale SA. But when comparing it to its historical volatility, Arteche Lantegi Elkartea is 1.51 times less risky than Vale SA. It trades about 0.04 of its potential returns per unit of risk. Vale SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  840.00  in Vale SA on December 29, 2024 and sell it today you would earn a total of  106.00  from holding Vale SA or generate 12.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Arteche Lantegi Elkartea  vs.  Vale SA

Arteche Lantegi Elkartea

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arteche Lantegi Elkartea are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Arteche Lantegi 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Vale SA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arteche Lantegi and Vale SA

The main advantage of trading using opposite Arteche Lantegi and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arteche Lantegi 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 Arteche Lantegi Elkartea 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.