Correlation Between Rio Tinto and Xref
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Xref 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 Xref into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto and Xref, you can compare the effects of market volatilities on Rio Tinto and Xref 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 Xref. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Xref.
Diversification Opportunities for Rio Tinto and Xref
Very good diversification
The 3 months correlation between Rio and Xref is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Xref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xref 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 Xref. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xref has no effect on the direction of Rio Tinto i.e., Rio Tinto and Xref go up and down completely randomly.
Pair Corralation between Rio Tinto and Xref
Assuming the 90 days trading horizon Rio Tinto is expected to generate 3.95 times less return on investment than Xref. But when comparing it to its historical volatility, Rio Tinto is 1.23 times less risky than Xref. It trades about 0.07 of its potential returns per unit of risk. Xref is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 21.00 in Xref on October 20, 2024 and sell it today you would earn a total of 1.00 from holding Xref or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Tinto vs. Xref
Performance |
| Timeline |
| Rio Tinto |
| Xref |
Rio Tinto and Xref Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Xref
The main advantage of trading using opposite Rio Tinto and Xref positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Xref 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 Xref will offset losses from the drop in Xref's long position.| Rio Tinto vs. Bio Gene Technology | Rio Tinto vs. Bailador Technology Invest | Rio Tinto vs. Mayfield Childcare | Rio Tinto vs. Aurelia 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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