Correlation Between Aldebaran Resources and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Aldebaran Resources 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 Aldebaran Resources and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aldebaran Resources and Rio Tinto ADR, you can compare the effects of market volatilities on Aldebaran Resources 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 Aldebaran Resources with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldebaran Resources and Rio Tinto.
Diversification Opportunities for Aldebaran Resources and Rio Tinto
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aldebaran and Rio is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Aldebaran Resources and Rio Tinto ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto ADR and Aldebaran Resources 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 Aldebaran Resources 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 ADR has no effect on the direction of Aldebaran Resources i.e., Aldebaran Resources and Rio Tinto go up and down completely randomly.
Pair Corralation between Aldebaran Resources and Rio Tinto
Assuming the 90 days horizon Aldebaran Resources is expected to generate 2.41 times more return on investment than Rio Tinto. However, Aldebaran Resources is 2.41 times more volatile than Rio Tinto ADR. It trades about 0.07 of its potential returns per unit of risk. Rio Tinto ADR is currently generating about 0.01 per unit of risk. If you would invest 57.00 in Aldebaran Resources on August 29, 2024 and sell it today you would earn a total of 103.00 from holding Aldebaran Resources or generate 180.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aldebaran Resources vs. Rio Tinto ADR
Performance |
| Timeline |
| Aldebaran Resources |
| Rio Tinto ADR |
Aldebaran Resources and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aldebaran Resources and Rio Tinto
The main advantage of trading using opposite Aldebaran Resources and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldebaran Resources 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.| Aldebaran Resources vs. Huntsman Exploration | Aldebaran Resources vs. Aurelia Metals Limited | Aldebaran Resources vs. Adriatic Metals PLC | Aldebaran Resources vs. American Helium |
| Rio Tinto vs. Vale SA ADR | Rio Tinto vs. BHP Group Limited | Rio Tinto vs. Glencore PLC ADR | Rio Tinto vs. Piedmont Lithium Ltd |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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