Correlation Between Vale SA and Golden Goliath

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

Diversification Opportunities for Vale SA and Golden Goliath

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Vale SA and Golden is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Golden Goliath Res in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Goliath Res 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 Golden Goliath. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Goliath Res has no effect on the direction of Vale SA i.e., Vale SA and Golden Goliath go up and down completely randomly.

Pair Corralation between Vale SA and Golden Goliath

Given the investment horizon of 90 days Vale SA ADR is expected to generate 0.52 times more return on investment than Golden Goliath. However, Vale SA ADR is 1.93 times less risky than Golden Goliath. It trades about 0.06 of its potential returns per unit of risk. Golden Goliath Res is currently generating about -0.22 per unit of risk. If you would invest  1,338  in Vale SA ADR on May 13, 2022 and sell it today you would earn a total of  38.00  from holding Vale SA ADR or generate 2.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Vale SA ADR  vs.  Golden Goliath Res

 Performance (%) 
       Timeline  
Vale SA ADR 
Vale SA Performance
0 of 100
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 latest weak performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Vale SA Price Channel

Golden Goliath Res 
Golden Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Golden Goliath Res are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Golden Goliath exhibited solid returns over the last few months and may actually be approaching a breakup point.

Golden Price Channel

Vale SA and Golden Goliath Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Vale SA and Golden Goliath

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

Vale SA ADR

Pair trading matchups for Vale SA

The idea behind Vale SA ADR and Golden Goliath Res 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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