Correlation Between Minera Frisco and Vale SA

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

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

Diversification Opportunities for Minera Frisco and Vale SA

0.36

Correlation Coefficient

Minera Frisco  Vale SA

Weak diversification

The 3 months correlation between Minera and Vale is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Minera Frisco SAB and Vale SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA and Minera Frisco 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 Minera Frisco SAB 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 has no effect on the direction of Minera Frisco i.e., Minera Frisco and Vale SA go up and down completely randomly.

Pair Corralation between Minera Frisco and Vale SA

Assuming the 90 days trading horizon Minera Frisco SAB is expected to generate 0.44 times more return on investment than Vale SA. However, Minera Frisco SAB is 2.26 times less risky than Vale SA. It trades about 0.03 of its potential returns per unit of risk. Vale SA is currently generating about 0.01 per unit of risk. If you would invest  255.00  in Minera Frisco SAB on September 23, 2024 and sell it today you would earn a total of  85.00  from holding Minera Frisco SAB or generate 33.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.71%
Values	Daily Returns

Minera Frisco SAB  vs.  Vale SA

Minera Frisco SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Minera Frisco SAB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Minera Frisco is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Vale SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vale SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Minera Frisco and Vale SA

The main advantage of trading using opposite Minera Frisco and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Minera Frisco 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 Minera Frisco SAB and Vale SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .