Correlation Between Ridgestone Mining and Vale SA
Can any of the company-specific risk be diversified away by investing in both Ridgestone Mining 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 Ridgestone Mining and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ridgestone Mining and Vale SA ADR, you can compare the effects of market volatilities on Ridgestone Mining 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 Ridgestone Mining with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ridgestone Mining and Vale SA.
Diversification Opportunities for Ridgestone Mining and Vale SA
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ridgestone and Vale is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Ridgestone Mining 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 Ridgestone Mining 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 Ridgestone Mining 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 Ridgestone Mining i.e., Ridgestone Mining and Vale SA go up and down completely randomly.
Pair Corralation between Ridgestone Mining and Vale SA
Assuming the 90 days horizon Ridgestone Mining is expected to generate 4.36 times more return on investment than Vale SA. However, Ridgestone Mining is 4.36 times more volatile than Vale SA ADR. It trades about 0.06 of its potential returns per unit of risk. Vale SA ADR is currently generating about -0.24 per unit of risk. If you would invest 5.80 in Ridgestone Mining on August 29, 2024 and sell it today you would earn a total of 0.30 from holding Ridgestone Mining or generate 5.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ridgestone Mining vs. Vale SA ADR
Performance |
| Timeline |
| Ridgestone Mining |
| Vale SA ADR |
Ridgestone Mining and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ridgestone Mining and Vale SA
The main advantage of trading using opposite Ridgestone Mining and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ridgestone Mining 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.| Ridgestone Mining vs. ZincX Resources Corp | Ridgestone Mining vs. Strategic Resources | Ridgestone Mining vs. Nuinsco Resources Limited | Ridgestone Mining vs. Qubec Nickel Corp |
| 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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