Correlation Between Granite Creek and Vale SA

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

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

Diversification Opportunities for Granite Creek and Vale SA

0.66

Correlation Coefficient

Granite Creek  Vale SA

Poor diversification

The 3 months correlation between Granite and Vale is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Granite Creek Copper 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 Granite Creek 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 Granite Creek Copper 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 Granite Creek i.e., Granite Creek and Vale SA go up and down completely randomly.

Pair Corralation between Granite Creek and Vale SA

Assuming the 90 days horizon Granite Creek Copper is expected to generate 11.51 times more return on investment than Vale SA. However, Granite Creek is 11.51 times more volatile than Vale SA ADR. It trades about 0.13 of its potential returns per unit of risk. Vale SA ADR is currently generating about -0.17 per unit of risk. If you would invest  1.19  in Granite Creek Copper on October 4, 2024 and sell it today you would earn a total of  0.24  from holding Granite Creek Copper or generate 20.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Granite Creek Copper  vs.  Vale SA ADR

Granite Creek Copper

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Granite Creek Copper are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Granite Creek reported solid returns over the last few months and may actually be approaching a breakup point.

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 weak performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Granite Creek and Vale SA

The main advantage of trading using opposite Granite Creek and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Granite Creek 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 Granite Creek Copper 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..