Correlation Between Rio Tinto and AMG Advanced
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and AMG Advanced 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 AMG Advanced 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 AMG Advanced Metallurgical, you can compare the effects of market volatilities on Rio Tinto and AMG Advanced 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 AMG Advanced. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and AMG Advanced.
Diversification Opportunities for Rio Tinto and AMG Advanced
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rio and AMG is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and AMG Advanced Metallurgical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AMG Advanced Metallu 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 AMG Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AMG Advanced Metallu has no effect on the direction of Rio Tinto i.e., Rio Tinto and AMG Advanced go up and down completely randomly.
Pair Corralation between Rio Tinto and AMG Advanced
Assuming the 90 days horizon Rio Tinto Group is expected to generate 0.23 times more return on investment than AMG Advanced. However, Rio Tinto Group is 4.41 times less risky than AMG Advanced. It trades about 0.17 of its potential returns per unit of risk. AMG Advanced Metallurgical is currently generating about 0.04 per unit of risk. If you would invest 5,764 in Rio Tinto Group on November 4, 2024 and sell it today you would earn a total of 236.00 from holding Rio Tinto Group or generate 4.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Tinto Group vs. AMG Advanced Metallurgical
Performance |
| Timeline |
| Rio Tinto Group |
| AMG Advanced Metallu |
Rio Tinto and AMG Advanced Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and AMG Advanced
The main advantage of trading using opposite Rio Tinto and AMG Advanced positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, AMG Advanced 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 AMG Advanced will offset losses from the drop in AMG Advanced's long position.| Rio Tinto vs. BHP Group Limited | Rio Tinto vs. Green Shift Commodities | Rio Tinto vs. Glencore PLC | Rio Tinto vs. Electra Battery Materials |
| AMG Advanced vs. Huntsman Exploration | AMG Advanced vs. Aurelia Metals Limited | AMG Advanced vs. Adriatic Metals PLC | AMG Advanced vs. American Helium |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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