Correlation Between Lifezone Metals and Vale SA
Can any of the company-specific risk be diversified away by investing in both Lifezone Metals 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 Lifezone Metals and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lifezone Metals Limited and Vale SA ADR, you can compare the effects of market volatilities on Lifezone Metals 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 Lifezone Metals with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lifezone Metals and Vale SA.
Diversification Opportunities for Lifezone Metals and Vale SA
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Lifezone and Vale is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Lifezone Metals Limited 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 Lifezone Metals 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 Lifezone Metals Limited 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 Lifezone Metals i.e., Lifezone Metals and Vale SA go up and down completely randomly.
Pair Corralation between Lifezone Metals and Vale SA
Considering the 90-day investment horizon Lifezone Metals Limited is expected to generate 1.59 times more return on investment than Vale SA. However, Lifezone Metals is 1.59 times more volatile than Vale SA ADR. It trades about 0.16 of its potential returns per unit of risk. Vale SA ADR is currently generating about -0.22 per unit of risk. If you would invest 632.00 in Lifezone Metals Limited on August 30, 2024 and sell it today you would earn a total of 63.00 from holding Lifezone Metals Limited or generate 9.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lifezone Metals Limited vs. Vale SA ADR
Performance |
| Timeline |
| Lifezone Metals |
| Vale SA ADR |
Lifezone Metals and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lifezone Metals and Vale SA
The main advantage of trading using opposite Lifezone Metals and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifezone Metals 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.| Lifezone Metals vs. Suntory Beverage Food | Lifezone Metals vs. Aspen Insurance Holdings | Lifezone Metals vs. Primerica | Lifezone Metals vs. Ambev SA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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