Correlation Between Solitario Exploration and Vale SA

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

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

Diversification Opportunities for Solitario Exploration and Vale SA

0.69

Correlation Coefficient

Solitario Exploration  Vale SA

Poor diversification

The 3 months correlation between Solitario and Vale is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Solitario Exploration Royalty 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 Solitario Exploration 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 Solitario Exploration Royalty 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 Solitario Exploration i.e., Solitario Exploration and Vale SA go up and down completely randomly.

Pair Corralation between Solitario Exploration and Vale SA

Considering the 90-day investment horizon Solitario Exploration Royalty is expected to generate 1.79 times more return on investment than Vale SA. However, Solitario Exploration is 1.79 times more volatile than Vale SA ADR. It trades about -0.04 of its potential returns per unit of risk. Vale SA ADR is currently generating about -0.22 per unit of risk. If you would invest  68.00  in Solitario Exploration Royalty on October 12, 2024 and sell it today you would lose (7.00) from holding Solitario Exploration Royalty or give up 10.29% of portfolio value over 90 days.

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

Solitario Exploration Royalty  vs.  Vale SA ADR

Solitario Exploration

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solitario Exploration Royalty has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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 Solitario Exploration and Vale SA

The main advantage of trading using opposite Solitario Exploration and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solitario Exploration 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 Solitario Exploration Royalty 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.