Correlation Between Rio Tinto and Altair International

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

Diversification Opportunities for Rio Tinto and Altair International

0.36

Correlation Coefficient

Rio Tinto  Altair International

Weak diversification

The 3 months correlation between Rio and Altair is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Altair International Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altair International Corp 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 Altair International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altair International Corp has no effect on the direction of Rio Tinto i.e., Rio Tinto and Altair International go up and down completely randomly.

Pair Corralation between Rio Tinto and Altair International

Assuming the 90 days horizon Rio Tinto Group is expected to under-perform the Altair International. But the pink sheet apears to be less risky and, when comparing its historical volatility, Rio Tinto Group is 9.39 times less risky than Altair International. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Altair International Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.80  in Altair International Corp on September 24, 2024 and sell it today you would lose (0.70) from holding Altair International Corp or give up 14.58% 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.  Altair International Corp

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.

Altair International Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Altair International Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Altair International displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio Tinto and Altair International

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

The idea behind Rio Tinto Group and Altair International Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.