Correlation Between Central Asia and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Central Asia 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 Central Asia and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Asia Metals and Rio Tinto PLC, you can compare the effects of market volatilities on Central Asia 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 Central Asia with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Asia and Rio Tinto.
Diversification Opportunities for Central Asia and Rio Tinto
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Central and Rio is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Central Asia Metals and Rio Tinto PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto PLC and Central Asia 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 Central Asia 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 PLC has no effect on the direction of Central Asia i.e., Central Asia and Rio Tinto go up and down completely randomly.
Pair Corralation between Central Asia and Rio Tinto
Assuming the 90 days trading horizon Central Asia Metals is expected to generate 1.67 times more return on investment than Rio Tinto. However, Central Asia is 1.67 times more volatile than Rio Tinto PLC. It trades about -0.14 of its potential returns per unit of risk. Rio Tinto PLC is currently generating about -0.27 per unit of risk. If you would invest 16,800 in Central Asia Metals on October 12, 2024 and sell it today you would lose (900.00) from holding Central Asia Metals or give up 5.36% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.0% |
Values | Daily Returns |
Central Asia Metals vs. Rio Tinto PLC
Performance |
Timeline |
Central Asia Metals |
Rio Tinto PLC |
Central Asia and Rio Tinto Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Central Asia and Rio Tinto
The main advantage of trading using opposite Central Asia and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Asia 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.Central Asia vs. Diversified Energy | Central Asia vs. Seraphim Space Investment | Central Asia vs. Bankers Investment Trust | Central Asia vs. Mineral Financial Investments |
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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