Correlation Between Vale SA and Asiamet Resources

Can any of the company-specific risk be diversified away by investing in both Vale SA and Asiamet Resources 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 Asiamet Resources 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 Asiamet Resources, you can compare the effects of market volatilities on Vale SA and Asiamet Resources 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 Asiamet Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Asiamet Resources.

Diversification Opportunities for Vale SA and Asiamet Resources

-0.29

Correlation Coefficient

Vale SA  Asiamet Resources

Very good diversification

The 3 months correlation between Vale and Asiamet is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Asiamet Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asiamet 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 Asiamet Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asiamet Resources has no effect on the direction of Vale SA i.e., Vale SA and Asiamet Resources go up and down completely randomly.

Pair Corralation between Vale SA and Asiamet Resources

Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the Asiamet Resources. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA ADR is 1.98 times less risky than Asiamet Resources. The stock trades about -0.05 of its potential returns per unit of risk. The Asiamet Resources is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.30  in Asiamet Resources on September 14, 2024 and sell it today you would earn a total of  0.10  from holding Asiamet Resources or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Vale SA ADR  vs.  Asiamet Resources

Vale SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vale SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Vale SA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Asiamet Resources

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asiamet Resources are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, Asiamet Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vale SA and Asiamet Resources

The main advantage of trading using opposite Vale SA and Asiamet Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vale SA position performs unexpectedly, Asiamet Resources 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 Asiamet Resources will offset losses from the drop in Asiamet Resources' long position.

The idea behind Vale SA ADR and Asiamet Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.