Correlation Between Alpha Lithium and Vale SA

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

By analyzing existing cross correlation between Alpha Lithium Corp and Vale SA ADR, you can compare the effects of market volatilities on Alpha Lithium and Vale SA 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 Alpha Lithium with a short position of Vale SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Lithium and Vale SA.

Diversification Opportunities for Alpha Lithium and Vale SA

0.0

Correlation Coefficient

Alpha Lithium  Vale SA

Pay attention - limited upside

The 3 months correlation between Alpha and Vale is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Lithium Corp and Vale SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA ADR and Alpha Lithium 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 Alpha Lithium Corp are associated (or correlated) with Vale SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vale SA ADR has no effect on the direction of Alpha Lithium i.e., Alpha Lithium and Vale SA go up and down completely randomly.

Pair Corralation between Alpha Lithium and Vale SA

If you would invest  852.00  in Vale SA ADR on December 28, 2024 and sell it today you would earn a total of  154.50  from holding Vale SA ADR or generate 18.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Alpha Lithium Corp  vs.  Vale SA ADR

Alpha Lithium Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Alpha Lithium is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Vale SA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Vale SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha Lithium and Vale SA

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

The idea behind Alpha Lithium Corp and Vale SA ADR 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.