Correlation Between Rio Tinto and Huntsman Exploration
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Huntsman Exploration 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 Huntsman Exploration 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 Huntsman Exploration, you can compare the effects of market volatilities on Rio Tinto and Huntsman Exploration 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 Huntsman Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Huntsman Exploration.
Diversification Opportunities for Rio Tinto and Huntsman Exploration
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rio and Huntsman is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Huntsman Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntsman Exploration 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 Huntsman Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntsman Exploration has no effect on the direction of Rio Tinto i.e., Rio Tinto and Huntsman Exploration go up and down completely randomly.
Pair Corralation between Rio Tinto and Huntsman Exploration
Assuming the 90 days horizon Rio Tinto is expected to generate 15.59 times less return on investment than Huntsman Exploration. But when comparing it to its historical volatility, Rio Tinto Group is 11.5 times less risky than Huntsman Exploration. It trades about 0.04 of its potential returns per unit of risk. Huntsman Exploration is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 4.70 in Huntsman Exploration on August 29, 2024 and sell it today you would lose (1.00) from holding Huntsman Exploration or give up 21.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 84.94% |
| Values | Daily Returns |
Rio Tinto Group vs. Huntsman Exploration
Performance |
| Timeline |
| Rio Tinto Group |
| Huntsman Exploration |
Rio Tinto and Huntsman Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Huntsman Exploration
The main advantage of trading using opposite Rio Tinto and Huntsman Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Huntsman Exploration 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 Huntsman Exploration will offset losses from the drop in Huntsman Exploration's long position.| Rio Tinto vs. Silver Dollar Resources | Rio Tinto vs. BHP Group Limited | Rio Tinto vs. Doubleview Gold Corp | Rio Tinto vs. Anglo American plc |
| Huntsman Exploration vs. Rockridge Resources | Huntsman Exploration vs. Ameriwest Lithium | Huntsman Exploration vs. Osisko Metals Incorporated | Huntsman Exploration vs. Volt Lithium 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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