Correlation Between QUALCOMM Incorporated and Vale SA

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

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

Diversification Opportunities for QUALCOMM Incorporated and Vale SA

0.78

Correlation Coefficient

QUALCOMM Incorporated  Vale SA

Poor diversification

The 3 months correlation between QUALCOMM and Vale is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding QUALCOMM Incorporated and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and QUALCOMM Incorporated 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 QUALCOMM Incorporated 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 QUALCOMM Incorporated i.e., QUALCOMM Incorporated and Vale SA go up and down completely randomly.

Pair Corralation between QUALCOMM Incorporated and Vale SA

Assuming the 90 days trading horizon QUALCOMM Incorporated is expected to generate 1.48 times more return on investment than Vale SA. However, QUALCOMM Incorporated is 1.48 times more volatile than Vale SA. It trades about 0.24 of its potential returns per unit of risk. Vale SA is currently generating about 0.01 per unit of risk. If you would invest  1,455  in QUALCOMM Incorporated on October 26, 2024 and sell it today you would earn a total of  130.00  from holding QUALCOMM Incorporated or generate 8.93% return on investment over 90 days.

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

QUALCOMM Incorporated  vs.  Vale SA

QUALCOMM Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days QUALCOMM Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, QUALCOMM Incorporated is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with QUALCOMM Incorporated and Vale SA

The main advantage of trading using opposite QUALCOMM Incorporated and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if QUALCOMM Incorporated 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 QUALCOMM Incorporated 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.