Correlation Between Rio Tinto and Agrometal SAI
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Agrometal SAI 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 Agrometal SAI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto PLC and Agrometal SAI, you can compare the effects of market volatilities on Rio Tinto and Agrometal SAI 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 Agrometal SAI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Agrometal SAI.
Diversification Opportunities for Rio Tinto and Agrometal SAI
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Rio and Agrometal is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto PLC and Agrometal SAI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agrometal SAI 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 PLC are associated (or correlated) with Agrometal SAI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agrometal SAI has no effect on the direction of Rio Tinto i.e., Rio Tinto and Agrometal SAI go up and down completely randomly.
Pair Corralation between Rio Tinto and Agrometal SAI
Assuming the 90 days trading horizon Rio Tinto PLC is expected to under-perform the Agrometal SAI. But the stock apears to be less risky and, when comparing its historical volatility, Rio Tinto PLC is 2.24 times less risky than Agrometal SAI. The stock trades about -0.24 of its potential returns per unit of risk. The Agrometal SAI is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 5,240 in Agrometal SAI on August 31, 2024 and sell it today you would earn a total of 1,860 from holding Agrometal SAI or generate 35.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Rio Tinto PLC vs. Agrometal SAI
Performance |
| Timeline |
| Rio Tinto PLC |
| Agrometal SAI |
Rio Tinto and Agrometal SAI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Agrometal SAI
The main advantage of trading using opposite Rio Tinto and Agrometal SAI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Agrometal SAI 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 Agrometal SAI will offset losses from the drop in Agrometal SAI's long position.| Rio Tinto vs. Agrometal SAI | Rio Tinto vs. Transportadora de Gas | Rio Tinto vs. Compania de Transporte | Rio Tinto vs. Telecom Argentina |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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