Correlation Between Vale SA and Sumitomo Metal
Can any of the company-specific risk be diversified away by investing in both Vale SA and Sumitomo Metal 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 Sumitomo Metal 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 Sumitomo Metal Mining, you can compare the effects of market volatilities on Vale SA and Sumitomo Metal 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 Sumitomo Metal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Sumitomo Metal.
Diversification Opportunities for Vale SA and Sumitomo Metal
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Vale and Sumitomo is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Sumitomo Metal Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sumitomo Metal Mining 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 Sumitomo Metal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sumitomo Metal Mining has no effect on the direction of Vale SA i.e., Vale SA and Sumitomo Metal go up and down completely randomly.
Pair Corralation between Vale SA and Sumitomo Metal
Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the Sumitomo Metal. In addition to that, Vale SA is 1.28 times more volatile than Sumitomo Metal Mining. It trades about -0.15 of its total potential returns per unit of risk. Sumitomo Metal Mining is currently generating about -0.12 per unit of volatility. If you would invest 612.00 in Sumitomo Metal Mining on October 20, 2024 and sell it today you would lose (37.00) from holding Sumitomo Metal Mining or give up 6.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA ADR vs. Sumitomo Metal Mining
Performance |
| Timeline |
| Vale SA ADR |
| Sumitomo Metal Mining |
Vale SA and Sumitomo Metal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Sumitomo Metal
The main advantage of trading using opposite Vale SA and Sumitomo Metal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Sumitomo Metal 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 Sumitomo Metal will offset losses from the drop in Sumitomo Metal'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 |
| Sumitomo Metal vs. Boliden AB ADR | Sumitomo Metal vs. Anglo American PLC | Sumitomo Metal vs. Glencore PLC | Sumitomo Metal vs. Snow Lake Resources |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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