Correlation Between Vale SA and Minera Frisco

Can any of the company-specific risk be diversified away by investing in both Vale SA and Minera Frisco 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 Minera Frisco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vale SA and Minera Frisco SAB, you can compare the effects of market volatilities on Vale SA and Minera Frisco 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 Minera Frisco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Minera Frisco.

Diversification Opportunities for Vale SA and Minera Frisco

0.33

Correlation Coefficient

Vale SA  Minera Frisco

Weak diversification

The 3 months correlation between Vale and Minera is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Minera Frisco SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Minera Frisco SAB 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 are associated (or correlated) with Minera Frisco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Minera Frisco SAB has no effect on the direction of Vale SA i.e., Vale SA and Minera Frisco go up and down completely randomly.

Pair Corralation between Vale SA and Minera Frisco

Assuming the 90 days trading horizon Vale SA is expected to under-perform the Minera Frisco. But the stock apears to be less risky and, when comparing its historical volatility, Vale SA is 1.51 times less risky than Minera Frisco. The stock trades about -0.26 of its potential returns per unit of risk. The Minera Frisco SAB is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  380.00  in Minera Frisco SAB on September 26, 2024 and sell it today you would lose (23.00) from holding Minera Frisco SAB or give up 6.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Vale SA  vs.  Minera Frisco SAB

Vale SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vale SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Minera Frisco SAB

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Minera Frisco SAB are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Minera Frisco may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Vale SA and Minera Frisco

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

The idea behind Vale SA and Minera Frisco SAB 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.