Correlation Between Rio Tinto and Aldebaran Resources
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Aldebaran Resources 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 Aldebaran Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto ADR and Aldebaran Resources, you can compare the effects of market volatilities on Rio Tinto and Aldebaran Resources 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 Aldebaran Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Aldebaran Resources.
Diversification Opportunities for Rio Tinto and Aldebaran Resources
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rio and Aldebaran is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto ADR and Aldebaran Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldebaran Resources 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 ADR are associated (or correlated) with Aldebaran Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldebaran Resources has no effect on the direction of Rio Tinto i.e., Rio Tinto and Aldebaran Resources go up and down completely randomly.
Pair Corralation between Rio Tinto and Aldebaran Resources
Considering the 90-day investment horizon Rio Tinto ADR is expected to under-perform the Aldebaran Resources. But the stock apears to be less risky and, when comparing its historical volatility, Rio Tinto ADR is 3.76 times less risky than Aldebaran Resources. The stock trades about -0.09 of its potential returns per unit of risk. The Aldebaran Resources is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 104.00 in Aldebaran Resources on August 25, 2024 and sell it today you would earn a total of 41.00 from holding Aldebaran Resources or generate 39.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Rio Tinto ADR vs. Aldebaran Resources
Performance |
| Timeline |
| Rio Tinto ADR |
| Aldebaran Resources |
Rio Tinto and Aldebaran Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Aldebaran Resources
The main advantage of trading using opposite Rio Tinto and Aldebaran Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Aldebaran Resources 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 Aldebaran Resources will offset losses from the drop in Aldebaran Resources' long position.| Rio Tinto vs. Vale SA ADR | Rio Tinto vs. Teck Resources Ltd | Rio Tinto vs. MP Materials Corp | Rio Tinto vs. Lithium Americas Corp |
| Aldebaran Resources vs. Huntsman Exploration | Aldebaran Resources vs. Aurelia Metals Limited | Aldebaran Resources vs. Adriatic Metals PLC | Aldebaran Resources vs. American Helium |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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