Correlation Between Vale SA and First Northern

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

Diversification Opportunities for Vale SA and First Northern

0.44

Correlation Coefficient

Vale SA  First Northern

Very weak diversification

The 3 months correlation between Vale and First is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and First Northern Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Northern Community 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 First Northern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Northern Community has no effect on the direction of Vale SA i.e., Vale SA and First Northern go up and down completely randomly.

Pair Corralation between Vale SA and First Northern

Given the investment horizon of 90 days Vale SA ADR is expected to under-perform the First Northern. In addition to that, Vale SA is 1.31 times more volatile than First Northern Community. It trades about -0.06 of its total potential returns per unit of risk. First Northern Community is currently generating about 0.34 per unit of volatility. If you would invest  995.00  in First Northern Community on May 6, 2025 and sell it today you would earn a total of  96.00  from holding First Northern Community or generate 9.65% return on investment over 90 days.

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

Vale SA ADR  vs.  First Northern Community

Vale SA ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vale SA ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

First Northern Community

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Northern Community are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, First Northern may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Vale SA and First Northern

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

The idea behind Vale SA ADR and First Northern Community 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 the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.