Correlation Between Vale SA and Glencore PLC

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

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

Diversification Opportunities for Vale SA and Glencore PLC

-0.75

Correlation Coefficient

Vale SA  Glencore PLC

Pay attention - limited upside

The 3 months correlation between Vale and Glencore is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA and Glencore PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore PLC 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 Glencore PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore PLC has no effect on the direction of Vale SA i.e., Vale SA and Glencore PLC go up and down completely randomly.

Pair Corralation between Vale SA and Glencore PLC

Assuming the 90 days trading horizon Vale SA is expected to generate 0.72 times more return on investment than Glencore PLC. However, Vale SA is 1.38 times less risky than Glencore PLC. It trades about 0.1 of its potential returns per unit of risk. Glencore PLC is currently generating about -0.12 per unit of risk. If you would invest  861.00  in Vale SA on December 29, 2024 and sell it today you would earn a total of  79.00  from holding Vale SA or generate 9.18% return on investment over 90 days.

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

Vale SA  vs.  Glencore PLC

Vale SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Vale SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Glencore PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Glencore PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vale SA and Glencore PLC

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

The idea behind Vale SA and Glencore PLC 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.