Correlation Between Vale SA and Elecnor SA

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

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

Diversification Opportunities for Vale SA and Elecnor SA

-0.53

Correlation Coefficient

Vale SA  Elecnor SA

Excellent diversification

The 3 months correlation between Vale and Elecnor is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Elecnor SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elecnor SA 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 Elecnor SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elecnor SA has no effect on the direction of Vale SA i.e., Vale SA and Elecnor SA go up and down completely randomly.

Pair Corralation between Vale SA and Elecnor SA

Assuming the 90 days trading horizon Vale SA is expected to under-perform the Elecnor SA. In addition to that, Vale SA is 1.57 times more volatile than Elecnor SA. It trades about -0.02 of its total potential returns per unit of risk. Elecnor SA is currently generating about 0.17 per unit of volatility. If you would invest  1,850  in Elecnor SA on September 14, 2024 and sell it today you would earn a total of  320.00  from holding Elecnor SA or generate 17.3% return on investment over 90 days.

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

Vale SA  vs.  Elecnor SA

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.

Elecnor SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Elecnor SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Elecnor SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vale SA and Elecnor SA

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

The idea behind Vale SA and Elecnor 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.