Correlation Between Vale SA and Graphex Group

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

Diversification Opportunities for Vale SA and Graphex Group

0.29

Correlation Coefficient

Vale SA  Graphex Group

Modest diversification

The 3 months correlation between Vale and Graphex is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Vale SA ADR and Graphex Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graphex Group Limited 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 Graphex Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graphex Group Limited has no effect on the direction of Vale SA i.e., Vale SA and Graphex Group go up and down completely randomly.

Pair Corralation between Vale SA and Graphex Group

Given the investment horizon of 90 days Vale SA ADR is expected to generate 0.26 times more return on investment than Graphex Group. However, Vale SA ADR is 3.85 times less risky than Graphex Group. It trades about -0.04 of its potential returns per unit of risk. Graphex Group Limited is currently generating about -0.01 per unit of risk. If you would invest  1,376  in Vale SA ADR on September 23, 2024 and sell it today you would lose (486.00) from holding Vale SA ADR or give up 35.32% of portfolio value over 90 days.

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

Vale SA ADR  vs.  Graphex Group Limited

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 January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Graphex Group Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Graphex Group Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Graphex Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vale SA and Graphex Group

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

The idea behind Vale SA ADR and Graphex Group Limited 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.