Correlation Between ANGLO AMERICAN and Vale SA
Can any of the company-specific risk be diversified away by investing in both ANGLO AMERICAN 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 ANGLO AMERICAN and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ANGLO AMERICAN SPADR and Vale SA, you can compare the effects of market volatilities on ANGLO AMERICAN 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 ANGLO AMERICAN with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of ANGLO AMERICAN and Vale SA.
Diversification Opportunities for ANGLO AMERICAN and Vale SA
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ANGLO and Vale is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding ANGLO AMERICAN SPADR and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and ANGLO AMERICAN 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 ANGLO AMERICAN SPADR 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 has no effect on the direction of ANGLO AMERICAN i.e., ANGLO AMERICAN and Vale SA go up and down completely randomly.
Pair Corralation between ANGLO AMERICAN and Vale SA
Assuming the 90 days trading horizon ANGLO AMERICAN SPADR is expected to generate 1.31 times more return on investment than Vale SA. However, ANGLO AMERICAN is 1.31 times more volatile than Vale SA. It trades about -0.01 of its potential returns per unit of risk. Vale SA is currently generating about -0.11 per unit of risk. If you would invest 1,410 in ANGLO AMERICAN SPADR on August 31, 2024 and sell it today you would lose (20.00) from holding ANGLO AMERICAN SPADR or give up 1.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ANGLO AMERICAN SPADR vs. Vale SA
Performance |
| Timeline |
| ANGLO AMERICAN SPADR |
| Vale SA |
ANGLO AMERICAN and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ANGLO AMERICAN and Vale SA
The main advantage of trading using opposite ANGLO AMERICAN and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANGLO AMERICAN 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.| ANGLO AMERICAN vs. LION ONE METALS | ANGLO AMERICAN vs. GRIFFIN MINING LTD | ANGLO AMERICAN vs. Lion One Metals | ANGLO AMERICAN vs. Tianjin Capital Environmental |
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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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