Correlation Between Rio Tinto and IXUP
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and IXUP 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 IXUP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto and IXUP, you can compare the effects of market volatilities on Rio Tinto and IXUP 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 IXUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and IXUP.
Diversification Opportunities for Rio Tinto and IXUP
Excellent diversification
The 3 months correlation between Rio and IXUP is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and IXUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IXUP 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 IXUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IXUP has no effect on the direction of Rio Tinto i.e., Rio Tinto and IXUP go up and down completely randomly.
Pair Corralation between Rio Tinto and IXUP
Assuming the 90 days trading horizon Rio Tinto is expected to under-perform the IXUP. But the stock apears to be less risky and, when comparing its historical volatility, Rio Tinto is 4.99 times less risky than IXUP. The stock trades about -0.01 of its potential returns per unit of risk. The IXUP is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1.30 in IXUP on August 25, 2024 and sell it today you would earn a total of 0.00 from holding IXUP or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Tinto vs. IXUP
Performance |
| Timeline |
| Rio Tinto |
| IXUP |
Rio Tinto and IXUP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and IXUP
The main advantage of trading using opposite Rio Tinto and IXUP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, IXUP 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 IXUP will offset losses from the drop in IXUP's long position.| Rio Tinto vs. Oceania Healthcare | Rio Tinto vs. Sonic Healthcare | Rio Tinto vs. The Environmental Group | Rio Tinto vs. Red Hill Iron |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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