Correlation Between Aeon Metals and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Aeon Metals 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 Aeon Metals and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aeon Metals and Rio Tinto, you can compare the effects of market volatilities on Aeon Metals 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 Aeon Metals with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aeon Metals and Rio Tinto.
Diversification Opportunities for Aeon Metals and Rio Tinto
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Aeon and Rio is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aeon Metals and Rio Tinto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto and Aeon Metals 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 Aeon Metals 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 has no effect on the direction of Aeon Metals i.e., Aeon Metals and Rio Tinto go up and down completely randomly.
Pair Corralation between Aeon Metals and Rio Tinto
Assuming the 90 days trading horizon Aeon Metals is expected to under-perform the Rio Tinto. In addition to that, Aeon Metals is 5.69 times more volatile than Rio Tinto. It trades about -0.01 of its total potential returns per unit of risk. Rio Tinto is currently generating about 0.02 per unit of volatility. If you would invest 10,533 in Rio Tinto on September 19, 2024 and sell it today you would earn a total of 1,316 from holding Rio Tinto or generate 12.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Aeon Metals vs. Rio Tinto
Performance |
| Timeline |
| Aeon Metals |
| Rio Tinto |
Aeon Metals and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aeon Metals and Rio Tinto
The main advantage of trading using opposite Aeon Metals and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aeon Metals 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.| Aeon Metals vs. Northern Star Resources | Aeon Metals vs. Evolution Mining | Aeon Metals vs. Bluescope Steel | Aeon Metals vs. Sandfire Resources NL |
| Rio Tinto vs. Step One Clothing | Rio Tinto vs. Energy Technologies Limited | Rio Tinto vs. Ramsay Health Care | Rio Tinto vs. Oceania Healthcare |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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