Correlation Between Vale SA and EMX Royalty
Can any of the company-specific risk be diversified away by investing in both Vale SA and EMX Royalty 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 EMX Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vale SA ADR and EMX Royalty Corp, you can compare the effects of market volatilities on Vale SA and EMX Royalty 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 EMX Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and EMX Royalty.
Diversification Opportunities for Vale SA and EMX Royalty
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vale and EMX is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and EMX Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMX Royalty Corp 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 ADR are associated (or correlated) with EMX Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMX Royalty Corp has no effect on the direction of Vale SA i.e., Vale SA and EMX Royalty go up and down completely randomly.
Pair Corralation between Vale SA and EMX Royalty
Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the EMX Royalty. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA ADR is 1.34 times less risky than EMX Royalty. The stock trades about -0.05 of its potential returns per unit of risk. The EMX Royalty Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 187.00 in EMX Royalty Corp on September 28, 2024 and sell it today you would lose (13.00) from holding EMX Royalty Corp or give up 6.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA ADR vs. EMX Royalty Corp
Performance |
| Timeline |
| Vale SA ADR |
| EMX Royalty Corp |
Vale SA and EMX Royalty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and EMX Royalty
The main advantage of trading using opposite Vale SA and EMX Royalty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, EMX Royalty 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 EMX Royalty will offset losses from the drop in EMX Royalty's long position.| 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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