Correlation Between Canadian General and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Canadian General 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 Canadian General and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian General Investments and Rio Tinto PLC, you can compare the effects of market volatilities on Canadian General 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 Canadian General with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian General and Rio Tinto.
Diversification Opportunities for Canadian General and Rio Tinto
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Canadian and Rio is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Canadian General Investments 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 Canadian General 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 Canadian General Investments 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 Canadian General i.e., Canadian General and Rio Tinto go up and down completely randomly.
Pair Corralation between Canadian General and Rio Tinto
Assuming the 90 days trading horizon Canadian General Investments is expected to generate 0.83 times more return on investment than Rio Tinto. However, Canadian General Investments is 1.2 times less risky than Rio Tinto. It trades about -0.17 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 233,000 in Canadian General Investments on October 12, 2024 and sell it today you would lose (7,000) from holding Canadian General Investments or give up 3.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Canadian General Investments vs. Rio Tinto PLC
Performance |
| Timeline |
| Canadian General Inv |
| Rio Tinto PLC |
Canadian General and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian General and Rio Tinto
The main advantage of trading using opposite Canadian General and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian General 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.| Canadian General vs. Various Eateries PLC | Canadian General vs. Trainline Plc | Canadian General vs. Symphony Environmental Technologies | Canadian General vs. Celebrus Technologies plc |
| Rio Tinto vs. Seraphim Space Investment | Rio Tinto vs. FC Investment Trust | Rio Tinto vs. Canadian General Investments | Rio Tinto vs. Trellus Health plc |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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