Correlation Between Rio Tinto and Australian Unity
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Australian Unity 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 Australian Unity into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto and Australian Unity Office, you can compare the effects of market volatilities on Rio Tinto and Australian Unity 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 Australian Unity. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Australian Unity.
Diversification Opportunities for Rio Tinto and Australian Unity
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rio and Australian is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Australian Unity Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Australian Unity Office 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 Australian Unity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Australian Unity Office has no effect on the direction of Rio Tinto i.e., Rio Tinto and Australian Unity go up and down completely randomly.
Pair Corralation between Rio Tinto and Australian Unity
Assuming the 90 days trading horizon Rio Tinto is expected to generate 1.15 times more return on investment than Australian Unity. However, Rio Tinto is 1.15 times more volatile than Australian Unity Office. It trades about -0.08 of its potential returns per unit of risk. Australian Unity Office is currently generating about -0.2 per unit of risk. If you would invest 12,012 in Rio Tinto on August 28, 2024 and sell it today you would lose (302.00) from holding Rio Tinto or give up 2.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Tinto vs. Australian Unity Office
Performance |
| Timeline |
| Rio Tinto |
| Australian Unity Office |
Rio Tinto and Australian Unity Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Australian Unity
The main advantage of trading using opposite Rio Tinto and Australian Unity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Australian Unity 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 Australian Unity will offset losses from the drop in Australian Unity's long position.| Rio Tinto vs. Perpetual Credit Income | Rio Tinto vs. Finexia Financial Group | Rio Tinto vs. Prime Financial Group | Rio Tinto vs. Ironbark Capital |
| Australian Unity vs. Clime Investment Management | Australian Unity vs. ACDC Metals | Australian Unity vs. Group 6 Metals | Australian Unity vs. Neurotech International |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |