Correlation Between Rio Tinto and Compaa Minera

Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Compaa Minera 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 Compaa Minera 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 Compaa Minera Autln, you can compare the effects of market volatilities on Rio Tinto and Compaa Minera 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 Compaa Minera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Compaa Minera.

Diversification Opportunities for Rio Tinto and Compaa Minera

0.28

Correlation Coefficient

Rio Tinto  Compaa Minera

Modest diversification

The 3 months correlation between Rio and Compaa is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Compaa Minera Autln in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compaa Minera Autln 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 Compaa Minera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compaa Minera Autln has no effect on the direction of Rio Tinto i.e., Rio Tinto and Compaa Minera go up and down completely randomly.

Pair Corralation between Rio Tinto and Compaa Minera

Assuming the 90 days trading horizon Rio Tinto Group is expected to generate 1.63 times more return on investment than Compaa Minera. However, Rio Tinto is 1.63 times more volatile than Compaa Minera Autln. It trades about -0.1 of its potential returns per unit of risk. Compaa Minera Autln is currently generating about -0.49 per unit of risk. If you would invest  124,515  in Rio Tinto Group on September 26, 2024 and sell it today you would lose (5,515) from holding Rio Tinto Group or give up 4.43% of portfolio value over 90 days.

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

Rio Tinto Group  vs.  Compaa Minera Autln

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. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Compaa Minera Autln

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compaa Minera Autln has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Rio Tinto and Compaa Minera

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

The idea behind Rio Tinto Group and Compaa Minera Autln 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.