Correlation Between Vale SA and Indivior PLC

Can any of the company-specific risk be diversified away by investing in both Vale SA and Indivior 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 Indivior PLC 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 Indivior PLC, you can compare the effects of market volatilities on Vale SA and Indivior 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 Indivior PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vale SA and Indivior PLC.

Diversification Opportunities for Vale SA and Indivior PLC

-0.89

Correlation Coefficient

Vale SA  Indivior PLC

Pay attention - limited upside

The 3 months correlation between Vale and Indivior is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Indivior PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indivior 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 ADR are associated (or correlated) with Indivior PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indivior PLC has no effect on the direction of Vale SA i.e., Vale SA and Indivior PLC go up and down completely randomly.

Pair Corralation between Vale SA and Indivior PLC

Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the Indivior PLC. In addition to that, Vale SA is 1.12 times more volatile than Indivior PLC. It trades about -0.04 of its total potential returns per unit of risk. Indivior PLC is currently generating about 0.23 per unit of volatility. If you would invest  2,310  in Indivior PLC on October 4, 2024 and sell it today you would earn a total of  84.00  from holding Indivior PLC or generate 3.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	2.67%
Values	Daily Returns

Vale SA ADR  vs.  Indivior PLC

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.

Indivior PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Indivior PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Indivior PLC is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vale SA and Indivior PLC

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

The idea behind Vale SA ADR and Indivior 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.