Correlation Between Rio Tinto and Auswide Bank
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Auswide Bank 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 Rio Tinto and Auswide Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto and Auswide Bank, you can compare the effects of market volatilities on Rio Tinto and Auswide Bank 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 Rio Tinto with a short position of Auswide Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Auswide Bank.
Diversification Opportunities for Rio Tinto and Auswide Bank
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rio and Auswide is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Auswide Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auswide Bank and Rio Tinto 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 Rio Tinto are associated (or correlated) with Auswide Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auswide Bank has no effect on the direction of Rio Tinto i.e., Rio Tinto and Auswide Bank go up and down completely randomly.
Pair Corralation between Rio Tinto and Auswide Bank
Assuming the 90 days trading horizon Rio Tinto is expected to under-perform the Auswide Bank. But the stock apears to be less risky and, when comparing its historical volatility, Rio Tinto is 2.2 times less risky than Auswide Bank. The stock trades about -0.18 of its potential returns per unit of risk. The Auswide Bank is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 439.00 in Auswide Bank on October 13, 2024 and sell it today you would earn a total of 38.00 from holding Auswide Bank or generate 8.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Rio Tinto vs. Auswide Bank
Performance |
| Timeline |
| Rio Tinto |
| Auswide Bank |
Rio Tinto and Auswide Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Auswide Bank
The main advantage of trading using opposite Rio Tinto and Auswide Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Auswide Bank 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 Auswide Bank will offset losses from the drop in Auswide Bank's long position.| Rio Tinto vs. EROAD | Rio Tinto vs. Nufarm Finance NZ | Rio Tinto vs. Black Rock Mining | Rio Tinto vs. Saferoads Holdings |
| Auswide Bank vs. Centrex Metals | Auswide Bank vs. Macquarie Technology Group | Auswide Bank vs. Aeon Metals | Auswide Bank vs. Group 6 Metals |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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