Correlation Between Vale SA and Taseko Mines

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

Diversification Opportunities for Vale SA and Taseko Mines

0.74

Correlation Coefficient

Vale SA  Taseko Mines

Poor diversification

The 3 months correlation between Vale and Taseko is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Taseko Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Taseko Mines 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 Taseko Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Taseko Mines has no effect on the direction of Vale SA i.e., Vale SA and Taseko Mines go up and down completely randomly.

Pair Corralation between Vale SA and Taseko Mines

Given the investment horizon of 90 days Vale SA is expected to generate 1.71 times less return on investment than Taseko Mines. But when comparing it to its historical volatility, Vale SA ADR is 2.38 times less risky than Taseko Mines. It trades about 0.18 of its potential returns per unit of risk. Taseko Mines is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  198.00  in Taseko Mines on December 25, 2024 and sell it today you would earn a total of  54.00  from holding Taseko Mines or generate 27.27% return on investment over 90 days.

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

Vale SA ADR  vs.  Taseko Mines

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 13 (%) 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.

Taseko Mines

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Taseko Mines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, Taseko Mines sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vale SA and Taseko Mines

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

The idea behind Vale SA ADR and Taseko Mines 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.