Correlation Between Vale SA and Zijin Mining

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

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

Diversification Opportunities for Vale SA and Zijin Mining

0.47

Correlation Coefficient

Vale SA  Zijin Mining

Very weak diversification

The 3 months correlation between Vale and Zijin is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Zijin Mining Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zijin Mining Group 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 Zijin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zijin Mining Group has no effect on the direction of Vale SA i.e., Vale SA and Zijin Mining go up and down completely randomly.

Pair Corralation between Vale SA and Zijin Mining

Assuming the 90 days trading horizon Vale SA is expected to generate 0.6 times more return on investment than Zijin Mining. However, Vale SA is 1.67 times less risky than Zijin Mining. It trades about 0.06 of its potential returns per unit of risk. Zijin Mining Group is currently generating about 0.03 per unit of risk. If you would invest  900.00  in Vale SA on November 29, 2024 and sell it today you would earn a total of  50.00  from holding Vale SA or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Vale SA  vs.  Zijin Mining Group

Vale SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain essential indicators, Vale SA may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Zijin Mining Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zijin Mining Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Zijin Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vale SA and Zijin Mining

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

The idea behind Vale SA and Zijin Mining Group 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.