Correlation Between Vale SA and Sayona Mining

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

Diversification Opportunities for Vale SA and Sayona Mining

0.43

Correlation Coefficient

Vale SA  Sayona Mining

Very weak diversification

The 3 months correlation between Vale and Sayona is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Sayona Mining Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sayona Mining Limited 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 Sayona Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sayona Mining Limited has no effect on the direction of Vale SA i.e., Vale SA and Sayona Mining go up and down completely randomly.

Pair Corralation between Vale SA and Sayona Mining

Given the investment horizon of 90 days Vale SA ADR is expected to generate 0.23 times more return on investment than Sayona Mining. However, Vale SA ADR is 4.35 times less risky than Sayona Mining. It trades about 0.19 of its potential returns per unit of risk. Sayona Mining Limited is currently generating about -0.03 per unit of risk. If you would invest  916.00  in Vale SA ADR on November 28, 2024 and sell it today you would earn a total of  60.00  from holding Vale SA ADR or generate 6.55% return on investment over 90 days.

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

Vale SA ADR  vs.  Sayona Mining Limited

Vale SA ADR

Risk-Adjusted Performance

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.

Sayona Mining Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sayona Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Vale SA and Sayona Mining

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

The idea behind Vale SA ADR and Sayona Mining Limited 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.