Correlation Between Electra Battery and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Electra Battery 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 Electra Battery and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Electra Battery Materials and Rio Tinto Group, you can compare the effects of market volatilities on Electra Battery 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 Electra Battery with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electra Battery and Rio Tinto.
Diversification Opportunities for Electra Battery and Rio Tinto
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Electra and Rio is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Electra Battery Materials 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 Electra Battery 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 Electra Battery Materials 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 Electra Battery i.e., Electra Battery and Rio Tinto go up and down completely randomly.
Pair Corralation between Electra Battery and Rio Tinto
Given the investment horizon of 90 days Electra Battery Materials is expected to under-perform the Rio Tinto. In addition to that, Electra Battery is 2.19 times more volatile than Rio Tinto Group. It trades about -0.08 of its total potential returns per unit of risk. Rio Tinto Group is currently generating about 0.0 per unit of volatility. If you would invest 6,260 in Rio Tinto Group on November 2, 2024 and sell it today you would lose (226.00) from holding Rio Tinto Group or give up 3.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Electra Battery Materials vs. Rio Tinto Group
Performance |
| Timeline |
| Electra Battery Materials |
| Rio Tinto Group |
Electra Battery and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Electra Battery and Rio Tinto
The main advantage of trading using opposite Electra Battery and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electra Battery 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.| Electra Battery vs. Cobalt Blue Holdings | Electra Battery vs. Bradda Head Lithium | Electra Battery vs. ioneer | Electra Battery vs. Tearlach Resources Limited |
| Rio Tinto vs. BHP Group Limited | Rio Tinto vs. Green Shift Commodities | Rio Tinto vs. Glencore PLC | Rio Tinto vs. Electra Battery Materials |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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