Correlation Between Vale SA and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Vale SA and Rio Tinto 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 Vale SA and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA and Rio Tinto PLC, you can compare the effects of market volatilities on Vale SA and Rio Tinto 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 Vale SA with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Rio Tinto.
Diversification Opportunities for Vale SA and Rio Tinto
Almost no diversification
The 3 months correlation between Vale and Rio is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Rio Tinto PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto PLC and Vale SA 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 Vale SA are associated (or correlated) with Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto PLC has no effect on the direction of Vale SA i.e., Vale SA and Rio Tinto go up and down completely randomly.
Pair Corralation between Vale SA and Rio Tinto
Assuming the 90 days trading horizon Vale SA is expected to generate 0.73 times more return on investment than Rio Tinto. However, Vale SA is 1.37 times less risky than Rio Tinto. It trades about 0.07 of its potential returns per unit of risk. Rio Tinto PLC is currently generating about 0.04 per unit of risk. If you would invest 319,500 in Vale SA on August 31, 2024 and sell it today you would earn a total of 233,500 from holding Vale SA or generate 73.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA vs. Rio Tinto PLC
Performance |
| Timeline |
| Vale SA |
| Rio Tinto PLC |
Vale SA and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Rio Tinto
The main advantage of trading using opposite Vale SA and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Rio Tinto 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 Rio Tinto will offset losses from the drop in Rio Tinto's long position.| Vale SA vs. Transportadora de Gas | Vale SA vs. Agrometal SAI | Vale SA vs. Harmony Gold Mining | Vale SA vs. Compania de Transporte |
| Rio Tinto vs. Agrometal SAI | Rio Tinto vs. Transportadora de Gas | Rio Tinto vs. Compania de Transporte | Rio Tinto vs. Telecom Argentina |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Stocks Directory Find actively traded stocks across global markets | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Top Crypto Exchanges Search and analyze digital assets across top global cryptocurrency exchanges | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |