Correlation Between Rio Tinto and Nickel Mines
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Nickel Mines 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 Nickel Mines 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 Nickel Mines Limited, you can compare the effects of market volatilities on Rio Tinto and Nickel Mines 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 Nickel Mines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Nickel Mines.
Diversification Opportunities for Rio Tinto and Nickel Mines
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rio and Nickel is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto ADR and Nickel Mines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nickel Mines Limited 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 Nickel Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nickel Mines Limited has no effect on the direction of Rio Tinto i.e., Rio Tinto and Nickel Mines go up and down completely randomly.
Pair Corralation between Rio Tinto and Nickel Mines
Considering the 90-day investment horizon Rio Tinto ADR is expected to generate 0.46 times more return on investment than Nickel Mines. However, Rio Tinto ADR is 2.18 times less risky than Nickel Mines. It trades about -0.15 of its potential returns per unit of risk. Nickel Mines Limited is currently generating about -0.24 per unit of risk. If you would invest 6,618 in Rio Tinto ADR on August 29, 2024 and sell it today you would lose (386.00) from holding Rio Tinto ADR or give up 5.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Tinto ADR vs. Nickel Mines Limited
Performance |
| Timeline |
| Rio Tinto ADR |
| Nickel Mines Limited |
Rio Tinto and Nickel Mines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Nickel Mines
The main advantage of trading using opposite Rio Tinto and Nickel Mines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Nickel Mines 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 Nickel Mines will offset losses from the drop in Nickel Mines' 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 |
| Nickel Mines vs. IGO Limited | Nickel Mines vs. Qubec Nickel Corp | Nickel Mines vs. Mineral Resources Limited | Nickel Mines vs. Surge Copper Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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