Correlation Between Rio Tinto and DISTRICT METALS

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Can any of the company-specific risk be diversified away by investing in both Rio Tinto and DISTRICT METALS 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 Rio Tinto and DISTRICT METALS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto Group and DISTRICT METALS, you can compare the effects of market volatilities on Rio Tinto and DISTRICT METALS 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 Rio Tinto with a short position of DISTRICT METALS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and DISTRICT METALS.

Diversification Opportunities for Rio Tinto and DISTRICT METALS

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Rio and DISTRICT is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and DISTRICT METALS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DISTRICT METALS and Rio Tinto 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 Rio Tinto Group are associated (or correlated) with DISTRICT METALS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DISTRICT METALS has no effect on the direction of Rio Tinto i.e., Rio Tinto and DISTRICT METALS go up and down completely randomly.

Pair Corralation between Rio Tinto and DISTRICT METALS

Assuming the 90 days trading horizon Rio Tinto Group is expected to under-perform the DISTRICT METALS. But the stock apears to be less risky and, when comparing its historical volatility, Rio Tinto Group is 3.39 times less risky than DISTRICT METALS. The stock trades about -0.01 of its potential returns per unit of risk. The DISTRICT METALS is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  24.00  in DISTRICT METALS on September 13, 2024 and sell it today you would earn a total of  0.00  from holding DISTRICT METALS or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Rio Tinto Group  vs.  DISTRICT METALS

 Performance 
       Timeline  
Rio Tinto Group 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rio Tinto may actually be approaching a critical reversion point that can send shares even higher in January 2025.
DISTRICT METALS 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in DISTRICT METALS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, DISTRICT METALS reported solid returns over the last few months and may actually be approaching a breakup point.

Rio Tinto and DISTRICT METALS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rio Tinto and DISTRICT METALS

The main advantage of trading using opposite Rio Tinto and DISTRICT METALS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, DISTRICT METALS 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 DISTRICT METALS will offset losses from the drop in DISTRICT METALS's long position.
The idea behind Rio Tinto Group and DISTRICT METALS pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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.

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