Correlation Between Vale SA and Pilbara Minerals
Can any of the company-specific risk be diversified away by investing in both Vale SA and Pilbara Minerals 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 Pilbara Minerals 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 Pilbara Minerals Limited, you can compare the effects of market volatilities on Vale SA and Pilbara Minerals 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 Pilbara Minerals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Pilbara Minerals.
Diversification Opportunities for Vale SA and Pilbara Minerals
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vale and Pilbara is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Pilbara Minerals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pilbara 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 Pilbara Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pilbara Minerals has no effect on the direction of Vale SA i.e., Vale SA and Pilbara Minerals go up and down completely randomly.
Pair Corralation between Vale SA and Pilbara Minerals
Given the investment horizon of 90 days Vale SA ADR is expected to generate 0.59 times more return on investment than Pilbara Minerals. However, Vale SA ADR is 1.68 times less risky than Pilbara Minerals. It trades about -0.03 of its potential returns per unit of risk. Pilbara Minerals Limited is currently generating about -0.57 per unit of risk. If you would invest 997.00 in Vale SA ADR on September 13, 2024 and sell it today you would lose (14.00) from holding Vale SA ADR or give up 1.4% 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. Pilbara Minerals Limited
Performance |
| Timeline |
| Vale SA ADR |
| Pilbara Minerals |
Vale SA and Pilbara Minerals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Pilbara Minerals
The main advantage of trading using opposite Vale SA and Pilbara Minerals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Pilbara Minerals 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 Pilbara Minerals will offset losses from the drop in Pilbara Minerals' 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 |
| Pilbara Minerals vs. Qubec Nickel Corp | Pilbara Minerals vs. IGO Limited | Pilbara Minerals vs. Focus Graphite | Pilbara Minerals vs. Mineral Res |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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