Correlation Between Rio Tinto and Industrias Penoles
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Industrias Penoles 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 Industrias Penoles into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto Group and Industrias Penoles Sab, you can compare the effects of market volatilities on Rio Tinto and Industrias Penoles 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 Industrias Penoles. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Industrias Penoles.
Diversification Opportunities for Rio Tinto and Industrias Penoles
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Rio and Industrias is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Industrias Penoles Sab in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industrias Penoles Sab 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 Group are associated (or correlated) with Industrias Penoles. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industrias Penoles Sab has no effect on the direction of Rio Tinto i.e., Rio Tinto and Industrias Penoles go up and down completely randomly.
Pair Corralation between Rio Tinto and Industrias Penoles
Assuming the 90 days trading horizon Rio Tinto is expected to generate 2.72 times less return on investment than Industrias Penoles. But when comparing it to its historical volatility, Rio Tinto Group is 3.02 times less risky than Industrias Penoles. It trades about 0.17 of its potential returns per unit of risk. Industrias Penoles Sab is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,370 in Industrias Penoles Sab on September 12, 2024 and sell it today you would earn a total of 180.00 from holding Industrias Penoles Sab or generate 13.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Tinto Group vs. Industrias Penoles Sab
Performance |
| Timeline |
| Rio Tinto Group |
| Industrias Penoles Sab |
Rio Tinto and Industrias Penoles Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Industrias Penoles
The main advantage of trading using opposite Rio Tinto and Industrias Penoles positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Industrias Penoles 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 Industrias Penoles will offset losses from the drop in Industrias Penoles' long position.| Rio Tinto vs. Cass Information Systems | Rio Tinto vs. Treasury Wine Estates | Rio Tinto vs. National Storage Affiliates | Rio Tinto vs. TITAN MACHINERY |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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