Correlation Between AAC TECHNOLOGHLDGADR and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both AAC TECHNOLOGHLDGADR 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 AAC TECHNOLOGHLDGADR and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AAC TECHNOLOGHLDGADR and Rio Tinto Group, you can compare the effects of market volatilities on AAC TECHNOLOGHLDGADR 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 AAC TECHNOLOGHLDGADR with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of AAC TECHNOLOGHLDGADR and Rio Tinto.
Diversification Opportunities for AAC TECHNOLOGHLDGADR and Rio Tinto
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between AAC and Rio is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding AAC TECHNOLOGHLDGADR 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 AAC TECHNOLOGHLDGADR 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 AAC TECHNOLOGHLDGADR 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 AAC TECHNOLOGHLDGADR i.e., AAC TECHNOLOGHLDGADR and Rio Tinto go up and down completely randomly.
Pair Corralation between AAC TECHNOLOGHLDGADR and Rio Tinto
Assuming the 90 days horizon AAC TECHNOLOGHLDGADR is expected to generate 2.63 times more return on investment than Rio Tinto. However, AAC TECHNOLOGHLDGADR is 2.63 times more volatile than Rio Tinto Group. It trades about 0.06 of its potential returns per unit of risk. Rio Tinto Group is currently generating about 0.16 per unit of risk. If you would invest 446.00 in AAC TECHNOLOGHLDGADR on October 24, 2024 and sell it today you would earn a total of 12.00 from holding AAC TECHNOLOGHLDGADR or generate 2.69% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
AAC TECHNOLOGHLDGADR vs. Rio Tinto Group
Performance |
Timeline |
AAC TECHNOLOGHLDGADR |
Rio Tinto Group |
AAC TECHNOLOGHLDGADR and Rio Tinto Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AAC TECHNOLOGHLDGADR and Rio Tinto
The main advantage of trading using opposite AAC TECHNOLOGHLDGADR and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AAC TECHNOLOGHLDGADR 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.AAC TECHNOLOGHLDGADR vs. Synovus Financial Corp | AAC TECHNOLOGHLDGADR vs. CHIBA BANK | AAC TECHNOLOGHLDGADR vs. Webster Financial | AAC TECHNOLOGHLDGADR vs. SUN LIFE FINANCIAL |
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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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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