Correlation Between Lomiko Metals and Rio Tinto

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

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

Diversification Opportunities for Lomiko Metals and Rio Tinto

0.52

Correlation Coefficient

Lomiko Metals  Rio Tinto

Very weak diversification

The 3 months correlation between Lomiko and Rio is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Lomiko Metals and Rio Tinto Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto Group and Lomiko Metals 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 Lomiko Metals 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 Group has no effect on the direction of Lomiko Metals i.e., Lomiko Metals and Rio Tinto go up and down completely randomly.

Pair Corralation between Lomiko Metals and Rio Tinto

Assuming the 90 days horizon Lomiko Metals is expected to generate 45.52 times more return on investment than Rio Tinto. However, Lomiko Metals is 45.52 times more volatile than Rio Tinto Group. It trades about 0.15 of its potential returns per unit of risk. Rio Tinto Group is currently generating about 0.0 per unit of risk. If you would invest  18.00  in Lomiko Metals on September 24, 2024 and sell it today you would lose (9.20) from holding Lomiko Metals or give up 51.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.95%
Values	Daily Returns

Lomiko Metals  vs.  Rio Tinto Group

Lomiko Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lomiko Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Rio Tinto Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio Tinto Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Rio Tinto is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lomiko Metals and Rio Tinto

The main advantage of trading using opposite Lomiko Metals and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lomiko Metals 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 Lomiko Metals and Rio Tinto Group 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.