Correlation Between Vale SA and Teck Resources
Can any of the company-specific risk be diversified away by investing in both Vale SA and Teck 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 Teck 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 Teck Resources Ltd, you can compare the effects of market volatilities on Vale SA and Teck 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 Teck Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Teck Resources.
Diversification Opportunities for Vale SA and Teck Resources
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vale and Teck is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Teck Resources Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teck 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 Teck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teck Resources has no effect on the direction of Vale SA i.e., Vale SA and Teck Resources go up and down completely randomly.
Pair Corralation between Vale SA and Teck Resources
Assuming the 90 days trading horizon Vale SA is expected to generate 0.91 times more return on investment than Teck Resources. However, Vale SA is 1.09 times less risky than Teck Resources. It trades about 0.04 of its potential returns per unit of risk. Teck Resources Ltd is currently generating about 0.04 per unit of risk. If you would invest 643.00 in Vale SA on September 2, 2024 and sell it today you would earn a total of 309.00 from holding Vale SA or generate 48.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Teck Resources Ltd
Performance |
| Timeline |
| Vale SA |
| Teck Resources |
Vale SA and Teck Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Teck Resources
The main advantage of trading using opposite Vale SA and Teck Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Teck 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 Teck Resources will offset losses from the drop in Teck Resources' long position.| Vale SA vs. QURATE RETAIL INC | Vale SA vs. HOCHSCHILD MINING | Vale SA vs. Retail Estates NV | Vale SA vs. Boyd Gaming |
| Teck Resources vs. BHP Group Limited | Teck Resources vs. Rio Tinto Group | Teck Resources vs. Vale SA | Teck Resources vs. Vale SA |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm |