Correlation Between Vale SA and Peak Resources
Can any of the company-specific risk be diversified away by investing in both Vale SA and Peak 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 Peak Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Peak Resources Limited, you can compare the effects of market volatilities on Vale SA and Peak 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 Peak Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Peak Resources.
Diversification Opportunities for Vale SA and Peak Resources
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Vale and Peak is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Peak Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peak 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 are associated (or correlated) with Peak Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peak Resources has no effect on the direction of Vale SA i.e., Vale SA and Peak Resources go up and down completely randomly.
Pair Corralation between Vale SA and Peak Resources
Assuming the 90 days trading horizon Vale SA is expected to under-perform the Peak Resources. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA is 5.82 times less risky than Peak Resources. The stock trades about -0.04 of its potential returns per unit of risk. The Peak Resources Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 5.80 in Peak Resources Limited on September 12, 2024 and sell it today you would earn a total of 0.70 from holding Peak Resources Limited or generate 12.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Peak Resources Limited
Performance |
| Timeline |
| Vale SA |
| Peak Resources |
Vale SA and Peak Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Peak Resources
The main advantage of trading using opposite Vale SA and Peak Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Peak 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 Peak Resources will offset losses from the drop in Peak Resources' long position.| Vale SA vs. IMAGIN MEDICAL INC | Vale SA vs. Daido Steel Co | Vale SA vs. KRAKATAU STEEL B | Vale SA vs. Mitsui Chemicals |
| Peak Resources vs. NEWELL RUBBERMAID | Peak Resources vs. The Yokohama Rubber | Peak Resources vs. Hyster Yale Materials Handling | Peak Resources vs. Park Hotels Resorts |
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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