Correlation Between Vale SA and Western Copper
Can any of the company-specific risk be diversified away by investing in both Vale SA and Western Copper 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 Western Copper 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 Western Copper and, you can compare the effects of market volatilities on Vale SA and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Western Copper.
Diversification Opportunities for Vale SA and Western Copper
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Vale and Western is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Vale SA i.e., Vale SA and Western Copper go up and down completely randomly.
Pair Corralation between Vale SA and Western Copper
Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the Western Copper. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA ADR is 1.63 times less risky than Western Copper. The stock trades about -0.03 of its potential returns per unit of risk. The Western Copper and is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 174.00 in Western Copper and on August 29, 2024 and sell it today you would lose (62.00) from holding Western Copper and or give up 35.63% 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. Western Copper and
Performance |
| Timeline |
| Vale SA ADR |
| Western Copper |
Vale SA and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Western Copper
The main advantage of trading using opposite Vale SA and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper'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 |
| Western Copper vs. Lithium Americas Corp | Western Copper vs. Caterpillar | Western Copper vs. Exxon Mobil Corp | Western Copper vs. Cisco Systems |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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