Correlation Between Glencore PLC and Vale Indonesia
Can any of the company-specific risk be diversified away by investing in both Glencore PLC and Vale Indonesia 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 Glencore PLC and Vale Indonesia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Glencore PLC ADR and Vale Indonesia Tbk, you can compare the effects of market volatilities on Glencore PLC and Vale Indonesia 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 Glencore PLC with a short position of Vale Indonesia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Vale Indonesia.
Diversification Opportunities for Glencore PLC and Vale Indonesia
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Glencore and Vale is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC ADR and Vale Indonesia Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale Indonesia Tbk and Glencore PLC 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 Glencore PLC ADR are associated (or correlated) with Vale Indonesia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale Indonesia Tbk has no effect on the direction of Glencore PLC i.e., Glencore PLC and Vale Indonesia go up and down completely randomly.
Pair Corralation between Glencore PLC and Vale Indonesia
Assuming the 90 days horizon Glencore PLC ADR is expected to generate 0.9 times more return on investment than Vale Indonesia. However, Glencore PLC ADR is 1.11 times less risky than Vale Indonesia. It trades about 0.0 of its potential returns per unit of risk. Vale Indonesia Tbk is currently generating about -0.05 per unit of risk. If you would invest 1,015 in Glencore PLC ADR on August 31, 2024 and sell it today you would lose (55.00) from holding Glencore PLC ADR or give up 5.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Glencore PLC ADR vs. Vale Indonesia Tbk
Performance |
| Timeline |
| Glencore PLC ADR |
| Vale Indonesia Tbk |
Glencore PLC and Vale Indonesia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Glencore PLC and Vale Indonesia
The main advantage of trading using opposite Glencore PLC and Vale Indonesia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore PLC position performs unexpectedly, Vale Indonesia 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 Indonesia will offset losses from the drop in Vale Indonesia's long position.| Glencore PLC vs. Liontown Resources Limited | Glencore PLC vs. ATT Inc | Glencore PLC vs. Merck Company | Glencore PLC vs. Walt Disney |
| Vale Indonesia vs. Vale SA ADR | Vale Indonesia vs. Rio Tinto ADR | Vale Indonesia vs. BHP Group Limited | Vale Indonesia vs. Glencore PLC ADR |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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