Correlation Between Vale SA and Copper Lake
Can any of the company-specific risk be diversified away by investing in both Vale SA and Copper Lake 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 Copper Lake 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 Copper Lake Resources, you can compare the effects of market volatilities on Vale SA and Copper Lake 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 Copper Lake. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Copper Lake.
Diversification Opportunities for Vale SA and Copper Lake
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vale and Copper is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Copper Lake Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper Lake Resources 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 Copper Lake. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper Lake Resources has no effect on the direction of Vale SA i.e., Vale SA and Copper Lake go up and down completely randomly.
Pair Corralation between Vale SA and Copper Lake
Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the Copper Lake. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA ADR is 25.45 times less risky than Copper Lake. The stock trades about -0.06 of its potential returns per unit of risk. The Copper Lake Resources is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Copper Lake Resources on September 27, 2024 and sell it today you would lose (1.30) from holding Copper Lake Resources or give up 65.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Vale SA ADR vs. Copper Lake Resources
Performance |
| Timeline |
| Vale SA ADR |
| Copper Lake Resources |
Vale SA and Copper Lake Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Copper Lake
The main advantage of trading using opposite Vale SA and Copper Lake positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Copper Lake 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 Copper Lake will offset losses from the drop in Copper Lake'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 |
| Copper Lake vs. EMX Royalty Corp | Copper Lake vs. BHP Group Limited | Copper Lake vs. Vale SA ADR | Copper Lake vs. Rio Tinto ADR |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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