Correlation Between Vale SA and Millenium Hotels

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

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

Diversification Opportunities for Vale SA and Millenium Hotels

-0.12

Correlation Coefficient

Vale SA  Millenium Hotels

Good diversification

The 3 months correlation between Vale and Millenium is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Millenium Hotels Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Millenium Hotels Real 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 Millenium Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Millenium Hotels Real has no effect on the direction of Vale SA i.e., Vale SA and Millenium Hotels go up and down completely randomly.

Pair Corralation between Vale SA and Millenium Hotels

Assuming the 90 days trading horizon Vale SA is expected to under-perform the Millenium Hotels. In addition to that, Vale SA is 1.02 times more volatile than Millenium Hotels Real. It trades about -0.16 of its total potential returns per unit of risk. Millenium Hotels Real is currently generating about 0.03 per unit of volatility. If you would invest  260.00  in Millenium Hotels Real on October 26, 2024 and sell it today you would earn a total of  6.00  from holding Millenium Hotels Real or generate 2.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Vale SA  vs.  Millenium Hotels Real

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 weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Millenium Hotels Real

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Millenium Hotels Real are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Millenium Hotels is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vale SA and Millenium Hotels

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

The idea behind Vale SA and Millenium Hotels Real 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.