Correlation Between First State and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both First State 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 First State and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First State Financial and Rio Tinto Group, you can compare the effects of market volatilities on First State 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 First State with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of First State and Rio Tinto.
Diversification Opportunities for First State and Rio Tinto
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and Rio is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding First State Financial 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 First State 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 First State Financial 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 First State i.e., First State and Rio Tinto go up and down completely randomly.
Pair Corralation between First State and Rio Tinto
Given the investment horizon of 90 days First State Financial is expected to generate 11.23 times more return on investment than Rio Tinto. However, First State is 11.23 times more volatile than Rio Tinto Group. It trades about 0.06 of its potential returns per unit of risk. Rio Tinto Group is currently generating about 0.23 per unit of risk. If you would invest 3.88 in First State Financial on November 4, 2025 and sell it today you would lose (1.78) from holding First State Financial or give up 45.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First State Financial vs. Rio Tinto Group
Performance |
| Timeline |
| First State Financial |
| Rio Tinto Group |
First State and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First State and Rio Tinto
The main advantage of trading using opposite First State and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First State 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.| First State vs. First Republic Bank | First State vs. BioCube | First State vs. Trend Exploration I | First State vs. Eastern Goldfields |
| Rio Tinto vs. BHP Group Limited | Rio Tinto vs. China Zhong Qi | Rio Tinto vs. Grupo Mxico SAB | Rio Tinto vs. Zijin Mining Group |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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