Correlation Between Vale SA and Entree Resources

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

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

Diversification Opportunities for Vale SA and Entree Resources

0.0

Correlation Coefficient

Vale SA  Entree Resources

Pay attention - limited upside

The 3 months correlation between Vale and Entree is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Entree Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entree Resources 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 ADR are associated (or correlated) with Entree Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entree Resources has no effect on the direction of Vale SA i.e., Vale SA and Entree Resources go up and down completely randomly.

Pair Corralation between Vale SA and Entree Resources

If you would invest  852.00  in Vale SA ADR on December 28, 2024 and sell it today you would earn a total of  152.00  from holding Vale SA ADR or generate 17.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Vale SA ADR  vs.  Entree Resources

Vale SA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA ADR are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Vale SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Entree Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entree Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Entree Resources 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 Entree Resources

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

The idea behind Vale SA ADR and Entree Resources 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.