Correlation Between Rio Tinto and Peak Resources
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Peak 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 Peak Resources 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 Peak Resources Limited, you can compare the effects of market volatilities on Rio Tinto and Peak 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 Peak Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Peak Resources.
Diversification Opportunities for Rio Tinto and Peak Resources
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Rio and Peak is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Peak Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peak 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 Group are associated (or correlated) with Peak Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peak Resources has no effect on the direction of Rio Tinto i.e., Rio Tinto and Peak Resources go up and down completely randomly.
Pair Corralation between Rio Tinto and Peak Resources
Assuming the 90 days trading horizon Rio Tinto Group is expected to generate 0.16 times more return on investment than Peak Resources. However, Rio Tinto Group is 6.31 times less risky than Peak Resources. It trades about 0.06 of its potential returns per unit of risk. Peak Resources Limited is currently generating about -0.09 per unit of risk. If you would invest 5,950 in Rio Tinto Group on September 4, 2024 and sell it today you would earn a total of 150.00 from holding Rio Tinto Group or generate 2.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Rio Tinto Group vs. Peak Resources Limited
Performance |
| Timeline |
| Rio Tinto Group |
| Peak Resources |
Rio Tinto and Peak Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Peak Resources
The main advantage of trading using opposite Rio Tinto and Peak Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Peak 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 Peak Resources will offset losses from the drop in Peak Resources' long position.| Rio Tinto vs. LIFENET INSURANCE CO | Rio Tinto vs. FORWARD AIR P | Rio Tinto vs. Westinghouse Air Brake | Rio Tinto vs. Safety Insurance Group |
| Peak Resources vs. BHP Group Limited | Peak Resources vs. Rio Tinto Group | Peak Resources vs. Vale SA | Peak Resources vs. Glencore plc |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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