Correlation Between Rio Tinto and AMG Advanced
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and AMG Advanced 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 AMG Advanced 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 AMG Advanced Metallurgical, you can compare the effects of market volatilities on Rio Tinto and AMG Advanced 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 AMG Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and AMG Advanced.
Diversification Opportunities for Rio Tinto and AMG Advanced
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rio and AMG is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto ADR and AMG Advanced Metallurgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMG Advanced Metallu 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 AMG Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMG Advanced Metallu has no effect on the direction of Rio Tinto i.e., Rio Tinto and AMG Advanced go up and down completely randomly.
Pair Corralation between Rio Tinto and AMG Advanced
Considering the 90-day investment horizon Rio Tinto is expected to generate 1.23 times less return on investment than AMG Advanced. But when comparing it to its historical volatility, Rio Tinto ADR is 4.43 times less risky than AMG Advanced. It trades about 0.13 of its potential returns per unit of risk. AMG Advanced Metallurgical is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,477 in AMG Advanced Metallurgical on November 4, 2024 and sell it today you would earn a total of 16.00 from holding AMG Advanced Metallurgical or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Tinto ADR vs. AMG Advanced Metallurgical
Performance |
| Timeline |
| Rio Tinto ADR |
| AMG Advanced Metallu |
Rio Tinto and AMG Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and AMG Advanced
The main advantage of trading using opposite Rio Tinto and AMG Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, AMG Advanced 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 AMG Advanced will offset losses from the drop in AMG Advanced's 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 |
| AMG Advanced vs. Huntsman Exploration | AMG Advanced vs. Aurelia Metals Limited | AMG Advanced vs. Adriatic Metals PLC | AMG Advanced 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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