Correlation Between De Grey and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both De Grey 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 De Grey and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between De Grey Mining and Rio Tinto, you can compare the effects of market volatilities on De Grey 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 De Grey with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of De Grey and Rio Tinto.
Diversification Opportunities for De Grey and Rio Tinto
Poor diversification
The 3 months correlation between DEG and Rio is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining and Rio Tinto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto and De Grey 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 De Grey Mining 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 De Grey i.e., De Grey and Rio Tinto go up and down completely randomly.
Pair Corralation between De Grey and Rio Tinto
Assuming the 90 days trading horizon De Grey Mining is expected to generate 1.85 times more return on investment than Rio Tinto. However, De Grey is 1.85 times more volatile than Rio Tinto. It trades about 0.05 of its potential returns per unit of risk. Rio Tinto is currently generating about -0.05 per unit of risk. If you would invest 149.00 in De Grey Mining on August 31, 2024 and sell it today you would earn a total of 3.00 from holding De Grey Mining or generate 2.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
De Grey Mining vs. Rio Tinto
Performance |
| Timeline |
| De Grey Mining |
| Rio Tinto |
De Grey and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with De Grey and Rio Tinto
The main advantage of trading using opposite De Grey and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Grey 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.| De Grey vs. ABACUS STORAGE KING | De Grey vs. Infomedia | De Grey vs. Air New Zealand | De Grey vs. Bailador Technology Invest |
| Rio Tinto vs. Autosports Group | Rio Tinto vs. Sandon Capital Investments | Rio Tinto vs. Australian United Investment | Rio Tinto vs. MFF Capital Investments |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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