Correlation Between BSP Financial and Rio Tinto

Can any of the company-specific risk be diversified away by investing in both BSP Financial and Rio Tinto 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 BSP Financial and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BSP Financial Group and Rio Tinto, you can compare the effects of market volatilities on BSP Financial and Rio Tinto 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 BSP Financial with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of BSP Financial and Rio Tinto.

Diversification Opportunities for BSP Financial and Rio Tinto

-0.12

Correlation Coefficient

BSP Financial  Rio Tinto

Good diversification

The 3 months correlation between BSP and Rio is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding BSP Financial Group and Rio Tinto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto and BSP Financial 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 BSP Financial Group are associated (or correlated) with Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto has no effect on the direction of BSP Financial i.e., BSP Financial and Rio Tinto go up and down completely randomly.

Pair Corralation between BSP Financial and Rio Tinto

Assuming the 90 days trading horizon BSP Financial Group is expected to generate 1.26 times more return on investment than Rio Tinto. However, BSP Financial is 1.26 times more volatile than Rio Tinto. It trades about 0.06 of its potential returns per unit of risk. Rio Tinto is currently generating about -0.1 per unit of risk. If you would invest  620.00  in BSP Financial Group on September 27, 2024 and sell it today you would earn a total of  36.00  from holding BSP Financial Group or generate 5.81% return on investment over 90 days.

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

BSP Financial Group  vs.  Rio Tinto

BSP Financial Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BSP Financial Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, BSP Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Rio Tinto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio Tinto has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with BSP Financial and Rio Tinto

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

The idea behind BSP Financial Group and Rio Tinto 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.