Correlation Between Copper Lake and Vale SA

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

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

Diversification Opportunities for Copper Lake and Vale SA

0.5

Correlation Coefficient

Copper Lake  Vale SA

Very weak diversification

The 3 months correlation between Copper and Vale is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Copper Lake Resources and Vale SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vale SA ADR and Copper Lake 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 Copper Lake Resources 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 ADR has no effect on the direction of Copper Lake i.e., Copper Lake and Vale SA go up and down completely randomly.

Pair Corralation between Copper Lake and Vale SA

Assuming the 90 days horizon Copper Lake Resources is expected to generate 15.32 times more return on investment than Vale SA. However, Copper Lake is 15.32 times more volatile than Vale SA ADR. It trades about 0.08 of its potential returns per unit of risk. Vale SA ADR is currently generating about -0.05 per unit of risk. If you would invest  9.70  in Copper Lake Resources on October 5, 2024 and sell it today you would lose (9.00) from holding Copper Lake Resources or give up 92.78% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Copper Lake Resources  vs.  Vale SA ADR

Copper Lake Resources

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Copper Lake Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Copper Lake reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Copper Lake and Vale SA

The main advantage of trading using opposite Copper Lake and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Copper Lake 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 Copper Lake Resources and Vale SA ADR 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 CEOs Directory module to screen CEOs from public companies around the world.