Correlation Between Bank of America and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Bank of America 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 Bank of America and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of America and Rio Tinto Group, you can compare the effects of market volatilities on Bank of America 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 Bank of America with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of America and Rio Tinto.
Diversification Opportunities for Bank of America and Rio Tinto
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Bank and Rio is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Bank of America 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 Bank of America 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 Bank of America 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 Bank of America i.e., Bank of America and Rio Tinto go up and down completely randomly.
Pair Corralation between Bank of America and Rio Tinto
Considering the 90-day investment horizon Bank of America is expected to generate 1.05 times more return on investment than Rio Tinto. However, Bank of America is 1.05 times more volatile than Rio Tinto Group. It trades about 0.26 of its potential returns per unit of risk. Rio Tinto Group is currently generating about -0.04 per unit of risk. If you would invest 4,262 in Bank of America on August 29, 2024 and sell it today you would earn a total of 515.00 from holding Bank of America or generate 12.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Bank of America vs. Rio Tinto Group
Performance |
| Timeline |
| Bank of America |
| Rio Tinto Group |
Bank of America and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of America and Rio Tinto
The main advantage of trading using opposite Bank of America and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of America 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.| Bank of America vs. Citigroup | Bank of America vs. Wells Fargo | Bank of America vs. Toronto Dominion Bank | Bank of America vs. JPMorgan Chase Co |
| Rio Tinto vs. McEwen Mining | Rio Tinto vs. The Select Sector | Rio Tinto vs. SPDR Series Trust | Rio Tinto vs. FibroGen |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk |