Correlation Between Glencore PLC and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Glencore 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 Glencore 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 Glencore PLC and Rio Tinto ADR, you can compare the effects of market volatilities on Glencore 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 Glencore PLC with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Glencore PLC and Rio Tinto.
Diversification Opportunities for Glencore PLC and Rio Tinto
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Glencore and Rio is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Glencore PLC and Rio Tinto ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto ADR and Glencore 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 Glencore 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 ADR has no effect on the direction of Glencore PLC i.e., Glencore PLC and Rio Tinto go up and down completely randomly.
Pair Corralation between Glencore PLC and Rio Tinto
Assuming the 90 days horizon Glencore PLC is expected to under-perform the Rio Tinto. In addition to that, Glencore PLC is 1.31 times more volatile than Rio Tinto ADR. It trades about -0.01 of its total potential returns per unit of risk. Rio Tinto ADR is currently generating about 0.01 per unit of volatility. If you would invest 6,103 in Rio Tinto ADR on August 24, 2024 and sell it today you would earn a total of 132.00 from holding Rio Tinto ADR or generate 2.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Glencore PLC vs. Rio Tinto ADR
Performance |
| Timeline |
| Glencore PLC |
| Rio Tinto ADR |
Glencore PLC and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Glencore PLC and Rio Tinto
The main advantage of trading using opposite Glencore PLC and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Glencore 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.| Glencore PLC vs. Norra Metals Corp | Glencore PLC vs. Amarc Resources | Glencore PLC vs. ZincX Resources Corp | Glencore PLC vs. Nuinsco Resources Limited |
| Rio Tinto vs. Vale SA ADR | Rio Tinto vs. Teck Resources Ltd | Rio Tinto vs. MP Materials Corp | Rio Tinto vs. Lithium Americas Corp |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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