Correlation Between Vale SA and Airbus Group

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

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

Diversification Opportunities for Vale SA and Airbus Group

-0.17

Correlation Coefficient

Vale SA  Airbus Group

Good diversification

The 3 months correlation between Vale and Airbus is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE and Vale SA 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 Vale SA are associated (or correlated) with Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of Vale SA i.e., Vale SA and Airbus Group go up and down completely randomly.

Pair Corralation between Vale SA and Airbus Group

Assuming the 90 days trading horizon Vale SA is expected to generate 46.07 times less return on investment than Airbus Group. In addition to that, Vale SA is 1.34 times more volatile than Airbus Group SE. It trades about 0.0 of its total potential returns per unit of risk. Airbus Group SE is currently generating about 0.08 per unit of volatility. If you would invest  13,666  in Airbus Group SE on September 1, 2024 and sell it today you would earn a total of  1,062  from holding Airbus Group SE or generate 7.77% return on investment over 90 days.

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

Vale SA  vs.  Airbus Group SE

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.

Airbus Group SE

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus Group SE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Airbus Group may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Vale SA and Airbus Group

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

The idea behind Vale SA and Airbus Group SE 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.