Correlation Between CapitaLand Investment and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both CapitaLand Investment 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 CapitaLand Investment and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CapitaLand Investment Limited and Rio Tinto Group, you can compare the effects of market volatilities on CapitaLand Investment 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 CapitaLand Investment with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of CapitaLand Investment and Rio Tinto.
Diversification Opportunities for CapitaLand Investment and Rio Tinto
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CapitaLand and Rio is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding CapitaLand Investment Limited 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 CapitaLand Investment 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 CapitaLand Investment Limited 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 CapitaLand Investment i.e., CapitaLand Investment and Rio Tinto go up and down completely randomly.
Pair Corralation between CapitaLand Investment and Rio Tinto
Assuming the 90 days horizon CapitaLand Investment is expected to generate 3.23 times less return on investment than Rio Tinto. But when comparing it to its historical volatility, CapitaLand Investment Limited is 1.01 times less risky than Rio Tinto. It trades about 0.02 of its potential returns per unit of risk. Rio Tinto Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,659 in Rio Tinto Group on September 12, 2024 and sell it today you would earn a total of 1,571 from holding Rio Tinto Group or generate 27.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CapitaLand Investment Limited vs. Rio Tinto Group
Performance |
| Timeline |
| CapitaLand Investment |
| Rio Tinto Group |
CapitaLand Investment and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CapitaLand Investment and Rio Tinto
The main advantage of trading using opposite CapitaLand Investment and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CapitaLand Investment 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.| CapitaLand Investment vs. Superior Plus Corp | CapitaLand Investment vs. SIVERS SEMICONDUCTORS AB | CapitaLand Investment vs. Reliance Steel Aluminum | CapitaLand Investment vs. CHINA HUARONG ENERHD 50 |
| Rio Tinto vs. CapitaLand Investment Limited | Rio Tinto vs. Mitsubishi Materials | Rio Tinto vs. New Residential Investment | Rio Tinto vs. SANOK RUBBER ZY |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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