Correlation Between Teck Resources and Vale SA
Can any of the company-specific risk be diversified away by investing in both Teck Resources 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 Teck Resources and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Teck Resources Ltd and Vale SA ADR, you can compare the effects of market volatilities on Teck Resources 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 Teck Resources with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Teck Resources and Vale SA.
Diversification Opportunities for Teck Resources and Vale SA
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Teck and Vale is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Teck Resources Ltd 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 Teck Resources 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 Teck Resources Ltd 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 Teck Resources i.e., Teck Resources and Vale SA go up and down completely randomly.
Pair Corralation between Teck Resources and Vale SA
Given the investment horizon of 90 days Teck Resources Ltd is expected to generate 1.11 times more return on investment than Vale SA. However, Teck Resources is 1.11 times more volatile than Vale SA ADR. It trades about -0.14 of its potential returns per unit of risk. Vale SA ADR is currently generating about -0.17 per unit of risk. If you would invest 5,228 in Teck Resources Ltd on November 1, 2024 and sell it today you would lose (1,113) from holding Teck Resources Ltd or give up 21.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Teck Resources Ltd vs. Vale SA ADR
Performance |
| Timeline |
| Teck Resources |
| Vale SA ADR |
Teck Resources and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Teck Resources and Vale SA
The main advantage of trading using opposite Teck Resources and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Teck Resources 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.| Teck Resources vs. Rio Tinto ADR | Teck Resources vs. Vale SA ADR | Teck Resources vs. MP Materials Corp | Teck Resources vs. Lithium Americas 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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