Correlation Between Rio Tinto and Capitol Health
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Capitol Health 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 Capitol Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto and Capitol Health, you can compare the effects of market volatilities on Rio Tinto and Capitol Health 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 Capitol Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Capitol Health.
Diversification Opportunities for Rio Tinto and Capitol Health
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rio and Capitol is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Capitol Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Health 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 Capitol Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Health has no effect on the direction of Rio Tinto i.e., Rio Tinto and Capitol Health go up and down completely randomly.
Pair Corralation between Rio Tinto and Capitol Health
Assuming the 90 days trading horizon Rio Tinto is expected to under-perform the Capitol Health. But the stock apears to be less risky and, when comparing its historical volatility, Rio Tinto is 1.93 times less risky than Capitol Health. The stock trades about -0.08 of its potential returns per unit of risk. The Capitol Health is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 38.00 in Capitol Health on August 29, 2024 and sell it today you would lose (1.00) from holding Capitol Health or give up 2.63% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Tinto vs. Capitol Health
Performance |
| Timeline |
| Rio Tinto |
| Capitol Health |
Rio Tinto and Capitol Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Capitol Health
The main advantage of trading using opposite Rio Tinto and Capitol Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Capitol Health 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 Capitol Health will offset losses from the drop in Capitol Health'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 |
| Capitol Health vs. Inventis | Capitol Health vs. PM Capital Global | Capitol Health vs. Macquarie Group Ltd | Capitol Health vs. Wam Leaders |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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