Correlation Between Iluka Resources and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Iluka Resources 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 Iluka Resources and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iluka Resources Ltd and Rio Tinto Group, you can compare the effects of market volatilities on Iluka Resources 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 Iluka Resources with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iluka Resources and Rio Tinto.
Diversification Opportunities for Iluka Resources and Rio Tinto
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Iluka and Rio is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Iluka Resources Ltd 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 Iluka Resources 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 Iluka Resources Ltd 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 Iluka Resources i.e., Iluka Resources and Rio Tinto go up and down completely randomly.
Pair Corralation between Iluka Resources and Rio Tinto
Assuming the 90 days horizon Iluka Resources Ltd is expected to under-perform the Rio Tinto. In addition to that, Iluka Resources is 1.57 times more volatile than Rio Tinto Group. It trades about -0.34 of its total potential returns per unit of risk. Rio Tinto Group is currently generating about -0.06 per unit of volatility. If you would invest 7,700 in Rio Tinto Group on September 1, 2024 and sell it today you would lose (182.00) from holding Rio Tinto Group or give up 2.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iluka Resources Ltd vs. Rio Tinto Group
Performance |
| Timeline |
| Iluka Resources |
| Rio Tinto Group |
Iluka Resources and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iluka Resources and Rio Tinto
The main advantage of trading using opposite Iluka Resources and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iluka Resources 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.| Iluka Resources vs. ERAMET SA | Iluka Resources vs. Giyani Metals Corp | Iluka Resources vs. IGO Limited | Iluka Resources vs. Grid Metals 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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