Correlation Between Vale SA and Solitario Exploration
Can any of the company-specific risk be diversified away by investing in both Vale SA and Solitario Exploration 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 Solitario Exploration 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 Solitario Exploration Royalty, you can compare the effects of market volatilities on Vale SA and Solitario Exploration 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 Solitario Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Solitario Exploration.
Diversification Opportunities for Vale SA and Solitario Exploration
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Vale and Solitario is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Solitario Exploration Royalty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solitario Exploration 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 Solitario Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solitario Exploration has no effect on the direction of Vale SA i.e., Vale SA and Solitario Exploration go up and down completely randomly.
Pair Corralation between Vale SA and Solitario Exploration
Given the investment horizon of 90 days Vale SA ADR is expected to generate 0.64 times more return on investment than Solitario Exploration. However, Vale SA ADR is 1.56 times less risky than Solitario Exploration. It trades about -0.21 of its potential returns per unit of risk. Solitario Exploration Royalty is currently generating about -0.18 per unit of risk. If you would invest 1,081 in Vale SA ADR on August 31, 2024 and sell it today you would lose (94.00) from holding Vale SA ADR or give up 8.7% 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. Solitario Exploration Royalty
Performance |
| Timeline |
| Vale SA ADR |
| Solitario Exploration |
Vale SA and Solitario Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vale SA and Solitario Exploration
The main advantage of trading using opposite Vale SA and Solitario Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Solitario Exploration 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 Solitario Exploration will offset losses from the drop in Solitario Exploration'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 |
| Solitario Exploration vs. United States Antimony | Solitario Exploration vs. Golden Minerals | Solitario Exploration vs. International Tower Hill | Solitario Exploration vs. Vista Gold |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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