Correlation Between Rio Tinto and Edinburgh Investment
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Edinburgh Investment 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 Edinburgh Investment 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 Edinburgh Investment Trust, you can compare the effects of market volatilities on Rio Tinto and Edinburgh Investment 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 Edinburgh Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Edinburgh Investment.
Diversification Opportunities for Rio Tinto and Edinburgh Investment
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rio and Edinburgh is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto PLC and Edinburgh Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edinburgh Investment 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 Edinburgh Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edinburgh Investment has no effect on the direction of Rio Tinto i.e., Rio Tinto and Edinburgh Investment go up and down completely randomly.
Pair Corralation between Rio Tinto and Edinburgh Investment
Assuming the 90 days trading horizon Rio Tinto PLC is expected to under-perform the Edinburgh Investment. In addition to that, Rio Tinto is 1.51 times more volatile than Edinburgh Investment Trust. It trades about -0.42 of its total potential returns per unit of risk. Edinburgh Investment Trust is currently generating about -0.19 per unit of volatility. If you would invest 75,500 in Edinburgh Investment Trust on October 11, 2024 and sell it today you would lose (1,700) from holding Edinburgh Investment Trust or give up 2.25% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Tinto PLC vs. Edinburgh Investment Trust
Performance |
| Timeline |
| Rio Tinto PLC |
| Edinburgh Investment |
Rio Tinto and Edinburgh Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Edinburgh Investment
The main advantage of trading using opposite Rio Tinto and Edinburgh Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Edinburgh Investment 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 Edinburgh Investment will offset losses from the drop in Edinburgh Investment's long position.| Rio Tinto vs. Edinburgh Investment Trust | Rio Tinto vs. SBM Offshore NV | Rio Tinto vs. Mobius Investment Trust | Rio Tinto vs. Livermore Investments Group |
| Edinburgh Investment vs. Power Metal Resources | Edinburgh Investment vs. AMG Advanced Metallurgical | Edinburgh Investment vs. Beowulf Mining | Edinburgh Investment vs. iShares Physical Silver |
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 Stocks Directory module to find actively traded stocks across global markets.
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