Correlation Between MFF Capital and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both MFF Capital 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 MFF Capital and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MFF Capital Investments and Rio Tinto, you can compare the effects of market volatilities on MFF Capital 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 MFF Capital with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of MFF Capital and Rio Tinto.
Diversification Opportunities for MFF Capital and Rio Tinto
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between MFF and Rio is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding MFF Capital Investments and Rio Tinto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto and MFF Capital 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 MFF Capital Investments 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 has no effect on the direction of MFF Capital i.e., MFF Capital and Rio Tinto go up and down completely randomly.
Pair Corralation between MFF Capital and Rio Tinto
Assuming the 90 days trading horizon MFF Capital Investments is expected to generate 0.82 times more return on investment than Rio Tinto. However, MFF Capital Investments is 1.23 times less risky than Rio Tinto. It trades about 0.14 of its potential returns per unit of risk. Rio Tinto is currently generating about -0.02 per unit of risk. If you would invest 353.00 in MFF Capital Investments on September 2, 2024 and sell it today you would earn a total of 78.00 from holding MFF Capital Investments or generate 22.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MFF Capital Investments vs. Rio Tinto
Performance |
| Timeline |
| MFF Capital Investments |
| Rio Tinto |
MFF Capital and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MFF Capital and Rio Tinto
The main advantage of trading using opposite MFF Capital and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MFF Capital 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.| MFF Capital vs. Gold Road Resources | MFF Capital vs. 29Metals | MFF Capital vs. Land Homes Group | MFF Capital vs. Treasury Wine Estates |
| Rio Tinto vs. Super Retail Group | Rio Tinto vs. Ainsworth Game Technology | Rio Tinto vs. EROAD | Rio Tinto vs. Computershare |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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