Correlation Between Rio Tinto and OAKTRSPECLENDNEW

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

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

Diversification Opportunities for Rio Tinto and OAKTRSPECLENDNEW

0.07

Correlation Coefficient

Rio Tinto  OAKTRSPECLENDNEW

Significant diversification

The 3 months correlation between Rio and OAKTRSPECLENDNEW is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and OAKTRSPECLENDNEW in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OAKTRSPECLENDNEW and Rio Tinto 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 Rio Tinto Group are associated (or correlated) with OAKTRSPECLENDNEW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OAKTRSPECLENDNEW has no effect on the direction of Rio Tinto i.e., Rio Tinto and OAKTRSPECLENDNEW go up and down completely randomly.

Pair Corralation between Rio Tinto and OAKTRSPECLENDNEW

Assuming the 90 days trading horizon Rio Tinto Group is expected to generate 1.05 times more return on investment than OAKTRSPECLENDNEW. However, Rio Tinto is 1.05 times more volatile than OAKTRSPECLENDNEW. It trades about 0.11 of its potential returns per unit of risk. OAKTRSPECLENDNEW is currently generating about 0.07 per unit of risk. If you would invest  5,490  in Rio Tinto Group on September 5, 2024 and sell it today you would earn a total of  600.00  from holding Rio Tinto Group or generate 10.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Rio Tinto Group  vs.  OAKTRSPECLENDNEW

Rio Tinto Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rio Tinto may actually be approaching a critical reversion point that can send shares even higher in January 2025.

OAKTRSPECLENDNEW

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OAKTRSPECLENDNEW are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, OAKTRSPECLENDNEW may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rio Tinto and OAKTRSPECLENDNEW

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

The idea behind Rio Tinto Group and OAKTRSPECLENDNEW 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.