Correlation Between Rio2 and BTU Metals
Can any of the company-specific risk be diversified away by investing in both Rio2 and BTU Metals 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 Rio2 and BTU Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio2 Limited and BTU Metals Corp, you can compare the effects of market volatilities on Rio2 and BTU Metals 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 Rio2 with a short position of BTU Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio2 and BTU Metals.
Diversification Opportunities for Rio2 and BTU Metals
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Rio2 and BTU is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Rio2 Limited and BTU Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTU Metals Corp and Rio2 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 Rio2 Limited are associated (or correlated) with BTU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTU Metals Corp has no effect on the direction of Rio2 i.e., Rio2 and BTU Metals go up and down completely randomly.
Pair Corralation between Rio2 and BTU Metals
Assuming the 90 days horizon Rio2 Limited is expected to under-perform the BTU Metals. In addition to that, Rio2 is 1.8 times more volatile than BTU Metals Corp. It trades about -0.11 of its total potential returns per unit of risk. BTU Metals Corp is currently generating about 0.21 per unit of volatility. If you would invest 1.91 in BTU Metals Corp on August 25, 2024 and sell it today you would earn a total of 0.14 from holding BTU Metals Corp or generate 7.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Rio2 Limited vs. BTU Metals Corp
Performance |
| Timeline |
| Rio2 Limited |
| BTU Metals Corp |
Rio2 and BTU Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio2 and BTU Metals
The main advantage of trading using opposite Rio2 and BTU Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio2 position performs unexpectedly, BTU Metals 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 BTU Metals will offset losses from the drop in BTU Metals' long position.| Rio2 vs. Aurion Resources | Rio2 vs. Liberty Gold Corp | Rio2 vs. Orezone Gold Corp | Rio2 vs. Radisson Mining Resources |
| BTU Metals vs. Aurion Resources | BTU Metals vs. Liberty Gold Corp | BTU Metals vs. Rio2 Limited | BTU Metals vs. Orezone Gold 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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