Correlation Between Vale SA and Northern Dynasty
Can any of the company-specific risk be diversified away by investing in both Vale SA and Northern Dynasty 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 Northern Dynasty 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 Northern Dynasty Minerals, you can compare the effects of market volatilities on Vale SA and Northern Dynasty 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 Northern Dynasty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Northern Dynasty.
Diversification Opportunities for Vale SA and Northern Dynasty
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Vale and Northern is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Northern Dynasty Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Dynasty Minerals 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 Northern Dynasty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Dynasty Minerals has no effect on the direction of Vale SA i.e., Vale SA and Northern Dynasty go up and down completely randomly.
Pair Corralation between Vale SA and Northern Dynasty
Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the Northern Dynasty. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA ADR is 3.43 times less risky than Northern Dynasty. The stock trades about -0.22 of its potential returns per unit of risk. The Northern Dynasty Minerals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 43.00 in Northern Dynasty Minerals on August 30, 2024 and sell it today you would earn a total of 1.00 from holding Northern Dynasty Minerals or generate 2.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA ADR vs. Northern Dynasty Minerals
Performance |
| Timeline |
| Vale SA ADR |
| Northern Dynasty Minerals |
Vale SA and Northern Dynasty Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Northern Dynasty
The main advantage of trading using opposite Vale SA and Northern Dynasty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Northern Dynasty 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 Northern Dynasty will offset losses from the drop in Northern Dynasty'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 |
| Northern Dynasty vs. Vizsla Resources Corp | Northern Dynasty vs. Western Copper and | Northern Dynasty vs. Americas Silver Corp | Northern Dynasty vs. EMX Royalty 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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