Correlation Between US GoldMining and Vale SA
Can any of the company-specific risk be diversified away by investing in both US GoldMining 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 US GoldMining and Vale SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US GoldMining Common and Vale SA ADR, you can compare the effects of market volatilities on US GoldMining 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 US GoldMining with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of US GoldMining and Vale SA.
Diversification Opportunities for US GoldMining and Vale SA
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between USGO and Vale is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding US GoldMining Common 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 US GoldMining 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 US GoldMining Common 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 US GoldMining i.e., US GoldMining and Vale SA go up and down completely randomly.
Pair Corralation between US GoldMining and Vale SA
Given the investment horizon of 90 days US GoldMining Common is expected to generate 4.62 times more return on investment than Vale SA. However, US GoldMining is 4.62 times more volatile than Vale SA ADR. It trades about 0.17 of its potential returns per unit of risk. Vale SA ADR is currently generating about -0.25 per unit of risk. If you would invest 1,005 in US GoldMining Common on August 29, 2024 and sell it today you would earn a total of 282.00 from holding US GoldMining Common or generate 28.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US GoldMining Common vs. Vale SA ADR
Performance |
| Timeline |
| US GoldMining Common |
| Vale SA ADR |
US GoldMining and Vale SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US GoldMining and Vale SA
The main advantage of trading using opposite US GoldMining and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US GoldMining 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.| US GoldMining vs. Vale SA ADR | US GoldMining vs. BHP Group Limited | US GoldMining vs. Glencore PLC ADR | US GoldMining vs. Piedmont Lithium Ltd |
| 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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