Correlation Between Rio Tinto and Macquarie Group
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Macquarie Group 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 Macquarie Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto and Macquarie Group Ltd, you can compare the effects of market volatilities on Rio Tinto and Macquarie Group 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 Macquarie Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Macquarie Group.
Diversification Opportunities for Rio Tinto and Macquarie Group
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Rio and Macquarie is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Macquarie Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquarie Group 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 Macquarie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquarie Group has no effect on the direction of Rio Tinto i.e., Rio Tinto and Macquarie Group go up and down completely randomly.
Pair Corralation between Rio Tinto and Macquarie Group
Assuming the 90 days trading horizon Rio Tinto is expected to generate 3.35 times more return on investment than Macquarie Group. However, Rio Tinto is 3.35 times more volatile than Macquarie Group Ltd. It trades about 0.02 of its potential returns per unit of risk. Macquarie Group Ltd is currently generating about 0.06 per unit of risk. If you would invest 10,755 in Rio Tinto on August 28, 2024 and sell it today you would earn a total of 916.00 from holding Rio Tinto or generate 8.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Tinto vs. Macquarie Group Ltd
Performance |
| Timeline |
| Rio Tinto |
| Macquarie Group |
Rio Tinto and Macquarie Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Macquarie Group
The main advantage of trading using opposite Rio Tinto and Macquarie Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Macquarie Group 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 Macquarie Group will offset losses from the drop in Macquarie Group'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 |
| Macquarie Group vs. AMP | Macquarie Group vs. Regal Investment | Macquarie Group vs. REGAL ASIAN INVESTMENTS |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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