Correlation Between American Battery and Vale SA
Can any of the company-specific risk be diversified away by investing in both American Battery and Vale 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 American Battery and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Battery Technology and Vale SA ADR, you can compare the effects of market volatilities on American Battery and Vale 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 American Battery with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Battery and Vale SA.
Diversification Opportunities for American Battery and Vale SA
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Vale is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding American Battery Technology and Vale SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA ADR and American Battery 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 American Battery Technology are associated (or correlated) with Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA ADR has no effect on the direction of American Battery i.e., American Battery and Vale SA go up and down completely randomly.
Pair Corralation between American Battery and Vale SA
Given the investment horizon of 90 days American Battery Technology is expected to under-perform the Vale SA. In addition to that, American Battery is 4.37 times more volatile than Vale SA ADR. It trades about -0.14 of its total potential returns per unit of risk. Vale SA ADR is currently generating about 0.19 per unit of volatility. If you would invest 916.00 in Vale SA ADR on November 28, 2024 and sell it today you would earn a total of 60.00 from holding Vale SA ADR or generate 6.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Battery Technology vs. Vale SA ADR
Performance |
| Timeline |
| American Battery Tec |
| Vale SA ADR |
American Battery and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Battery and Vale SA
The main advantage of trading using opposite American Battery and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Battery position performs unexpectedly, Vale 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 Vale SA will offset losses from the drop in Vale SA's long position.| American Battery vs. Fevertree Drinks Plc | American Battery vs. Neogen | American Battery vs. Keurig Dr Pepper | American Battery vs. Diageo PLC ADR |
| Vale SA vs. BHP Group Limited | Vale SA vs. Teck Resources Ltd | Vale SA vs. Lithium Americas Corp | Vale SA vs. MP Materials Corp |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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