Correlation Between Vale SA and Sayona Mining
Can any of the company-specific risk be diversified away by investing in both Vale SA and Sayona Mining 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 Sayona Mining 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 Sayona Mining Limited, you can compare the effects of market volatilities on Vale SA and Sayona Mining 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 Sayona Mining. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Sayona Mining.
Diversification Opportunities for Vale SA and Sayona Mining
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vale and Sayona is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Sayona Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sayona Mining Limited 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 Sayona Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sayona Mining Limited has no effect on the direction of Vale SA i.e., Vale SA and Sayona Mining go up and down completely randomly.
Pair Corralation between Vale SA and Sayona Mining
Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the Sayona Mining. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA ADR is 4.41 times less risky than Sayona Mining. The stock trades about -0.21 of its potential returns per unit of risk. The Sayona Mining Limited is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2.30 in Sayona Mining Limited on August 31, 2024 and sell it today you would lose (0.30) from holding Sayona Mining Limited or give up 13.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vale SA ADR vs. Sayona Mining Limited
Performance |
| Timeline |
| Vale SA ADR |
| Sayona Mining Limited |
Vale SA and Sayona Mining Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Sayona Mining
The main advantage of trading using opposite Vale SA and Sayona Mining positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Sayona Mining 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 Sayona Mining will offset losses from the drop in Sayona Mining'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 |
| Sayona Mining vs. Portofino Resources | Sayona Mining vs. Core Lithium | Sayona Mining vs. Global Energy Metals | Sayona Mining vs. Clime Investment Management |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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