Correlation Between Rio Tinto and Ecora Resources
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Ecora 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 Ecora 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 Ecora Resources PLC, you can compare the effects of market volatilities on Rio Tinto and Ecora 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 Ecora Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Ecora Resources.
Diversification Opportunities for Rio Tinto and Ecora Resources
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rio and Ecora is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Ecora Resources PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecora Resources PLC 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 Ecora Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecora Resources PLC has no effect on the direction of Rio Tinto i.e., Rio Tinto and Ecora Resources go up and down completely randomly.
Pair Corralation between Rio Tinto and Ecora Resources
Assuming the 90 days horizon Rio Tinto Group is expected to under-perform the Ecora Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Rio Tinto Group is 1.65 times less risky than Ecora Resources. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Ecora Resources PLC is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 97.00 in Ecora Resources PLC on August 30, 2024 and sell it today you would lose (16.00) from holding Ecora Resources PLC or give up 16.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Tinto Group vs. Ecora Resources PLC
Performance |
| Timeline |
| Rio Tinto Group |
| Ecora Resources PLC |
Rio Tinto and Ecora Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Ecora Resources
The main advantage of trading using opposite Rio Tinto and Ecora Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Ecora 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 Ecora Resources will offset losses from the drop in Ecora Resources' 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 |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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