Correlation Between EMX Royalty and Vale SA

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

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

Diversification Opportunities for EMX Royalty and Vale SA

0.44

Correlation Coefficient

EMX Royalty  Vale SA

Very weak diversification

The 3 months correlation between EMX and Vale is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding EMX Royalty Corp 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 EMX Royalty 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 EMX Royalty Corp 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 EMX Royalty i.e., EMX Royalty and Vale SA go up and down completely randomly.

Pair Corralation between EMX Royalty and Vale SA

Considering the 90-day investment horizon EMX Royalty Corp is expected to generate 1.06 times more return on investment than Vale SA. However, EMX Royalty is 1.06 times more volatile than Vale SA ADR. It trades about 0.03 of its potential returns per unit of risk. Vale SA ADR is currently generating about -0.03 per unit of risk. If you would invest  171.00  in EMX Royalty Corp on August 28, 2024 and sell it today you would earn a total of  4.00  from holding EMX Royalty Corp or generate 2.34% return on investment over 90 days.

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

EMX Royalty Corp  vs.  Vale SA ADR

EMX Royalty Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EMX Royalty Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong primary indicators, EMX Royalty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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 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.

Pair Trading with EMX Royalty and Vale SA

The main advantage of trading using opposite EMX Royalty and Vale SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EMX Royalty 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 EMX Royalty Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.