Correlation Between Ferroglobe PLC and Vale SA

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

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

Diversification Opportunities for Ferroglobe PLC and Vale SA

0.46

Correlation Coefficient

Ferroglobe PLC  Vale SA

Very weak diversification

The 3 months correlation between Ferroglobe and Vale is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Ferroglobe PLC 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 Ferroglobe PLC 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 Ferroglobe PLC 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 Ferroglobe PLC i.e., Ferroglobe PLC and Vale SA go up and down completely randomly.

Pair Corralation between Ferroglobe PLC and Vale SA

Considering the 90-day investment horizon Ferroglobe PLC is expected to generate 1.31 times more return on investment than Vale SA. However, Ferroglobe PLC is 1.31 times more volatile than Vale SA ADR. It trades about 0.04 of its potential returns per unit of risk. Vale SA ADR is currently generating about -0.03 per unit of risk. If you would invest  413.00  in Ferroglobe PLC on September 12, 2024 and sell it today you would earn a total of  17.00  from holding Ferroglobe PLC or generate 4.12% return on investment over 90 days.

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

Ferroglobe PLC  vs.  Vale SA ADR

Ferroglobe PLC

Risk-Adjusted Performance

2 of 100

Weak

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

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 rather sound essential indicators, Vale SA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ferroglobe PLC and Vale SA

The main advantage of trading using opposite Ferroglobe PLC and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferroglobe PLC 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 Ferroglobe PLC 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.