Correlation Between Rio Tinto and Glencore PLC
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Glencore PLC 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 Glencore PLC 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 Glencore PLC, you can compare the effects of market volatilities on Rio Tinto and Glencore PLC 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 Glencore PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Glencore PLC.
Diversification Opportunities for Rio Tinto and Glencore PLC
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Rio and Glencore is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Glencore PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Glencore 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 Glencore PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Glencore PLC has no effect on the direction of Rio Tinto i.e., Rio Tinto and Glencore PLC go up and down completely randomly.
Pair Corralation between Rio Tinto and Glencore PLC
Assuming the 90 days horizon Rio Tinto Group is expected to generate 2.49 times more return on investment than Glencore PLC. However, Rio Tinto is 2.49 times more volatile than Glencore PLC. It trades about 0.03 of its potential returns per unit of risk. Glencore PLC is currently generating about -0.01 per unit of risk. If you would invest 6,528 in Rio Tinto Group on August 30, 2024 and sell it today you would earn a total of 990.00 from holding Rio Tinto Group or generate 15.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 89.29% |
| Values | Daily Returns |
Rio Tinto Group vs. Glencore PLC
Performance |
| Timeline |
| Rio Tinto Group |
| Glencore PLC |
Rio Tinto and Glencore PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Glencore PLC
The main advantage of trading using opposite Rio Tinto and Glencore PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Glencore PLC 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 Glencore PLC will offset losses from the drop in Glencore PLC'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 |
| Glencore PLC vs. Anglo American PLC | Glencore PLC vs. Teck Resources Ltd | Glencore PLC vs. BHP Group Limited | Glencore PLC vs. Vale SA ADR |
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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