Correlation Between Vale SA and Repsol

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

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

Diversification Opportunities for Vale SA and Repsol

0.13

Correlation Coefficient

Vale SA  Repsol

Average diversification

The 3 months correlation between Vale and Repsol is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Repsol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repsol 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 Repsol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repsol has no effect on the direction of Vale SA i.e., Vale SA and Repsol go up and down completely randomly.

Pair Corralation between Vale SA and Repsol

Assuming the 90 days trading horizon Vale SA is expected to generate 8.73 times less return on investment than Repsol. In addition to that, Vale SA is 1.37 times more volatile than Repsol. It trades about 0.03 of its total potential returns per unit of risk. Repsol is currently generating about 0.38 per unit of volatility. If you would invest  1,014  in Repsol on April 24, 2025 and sell it today you would earn a total of  306.00  from holding Repsol or generate 30.18% return on investment over 90 days.

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

Vale SA  vs.  Repsol

Vale SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Repsol

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Repsol are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Repsol exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vale SA and Repsol

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

The idea behind Vale SA and Repsol 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.