Correlation Between Vale SA and Mineral Resources
Can any of the company-specific risk be diversified away by investing in both Vale SA and Mineral Resources 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 Mineral Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA ADR and Mineral Resources Limited, you can compare the effects of market volatilities on Vale SA and Mineral Resources 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 Mineral Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Mineral Resources.
Diversification Opportunities for Vale SA and Mineral Resources
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vale and Mineral is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Mineral Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mineral Resources 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 ADR are associated (or correlated) with Mineral Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mineral Resources has no effect on the direction of Vale SA i.e., Vale SA and Mineral Resources go up and down completely randomly.
Pair Corralation between Vale SA and Mineral Resources
Given the investment horizon of 90 days Vale SA is expected to generate 5.37 times less return on investment than Mineral Resources. In addition to that, Vale SA is 1.59 times more volatile than Mineral Resources Limited. It trades about 0.02 of its total potential returns per unit of risk. Mineral Resources Limited is currently generating about 0.2 per unit of volatility. If you would invest 3,906 in Mineral Resources Limited on February 19, 2024 and sell it today you would earn a total of 514.00 from holding Mineral Resources Limited or generate 13.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Vale SA ADR vs. Mineral Resources Limited
Performance |
Timeline |
Vale SA ADR |
Mineral Resources |
Vale SA and Mineral Resources Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vale SA and Mineral Resources
The main advantage of trading using opposite Vale SA and Mineral Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Mineral Resources 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 Mineral Resources will offset losses from the drop in Mineral Resources' long position.Vale SA vs. Qubec Nickel Corp | Vale SA vs. American Rare Earths | Vale SA vs. Cypress Development Corp | Vale SA vs. Jervois Mining |
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Check out your portfolio center.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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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