Correlation Between Ferrexpo PLC and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Ferrexpo PLC 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 Ferrexpo PLC and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferrexpo PLC and Rio Tinto PLC, you can compare the effects of market volatilities on Ferrexpo PLC 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 Ferrexpo PLC with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrexpo PLC and Rio Tinto.
Diversification Opportunities for Ferrexpo PLC and Rio Tinto
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Ferrexpo and Rio is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Ferrexpo PLC 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 Ferrexpo PLC 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 Ferrexpo PLC 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 Ferrexpo PLC i.e., Ferrexpo PLC and Rio Tinto go up and down completely randomly.
Pair Corralation between Ferrexpo PLC and Rio Tinto
Assuming the 90 days trading horizon Ferrexpo PLC is expected to generate 2.73 times more return on investment than Rio Tinto. However, Ferrexpo PLC is 2.73 times more volatile than Rio Tinto PLC. It trades about 0.0 of its potential returns per unit of risk. Rio Tinto PLC is currently generating about -0.01 per unit of risk. If you would invest 15,662 in Ferrexpo PLC on September 23, 2024 and sell it today you would lose (5,402) from holding Ferrexpo PLC or give up 34.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferrexpo PLC vs. Rio Tinto PLC
Performance |
| Timeline |
| Ferrexpo PLC |
| Rio Tinto PLC |
Ferrexpo PLC and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferrexpo PLC and Rio Tinto
The main advantage of trading using opposite Ferrexpo PLC and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrexpo PLC 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.| Ferrexpo PLC vs. Martin Marietta Materials | Ferrexpo PLC vs. British American Tobacco | Ferrexpo PLC vs. Austevoll Seafood ASA | Ferrexpo PLC vs. Vulcan Materials Co |
| Rio Tinto vs. Givaudan SA | Rio Tinto vs. Antofagasta PLC | Rio Tinto vs. Ferrexpo PLC | Rio Tinto vs. Atalaya Mining |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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