Correlation Between Rio Tinto and Thunderstruck Resources
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Thunderstruck 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 Thunderstruck 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 Thunderstruck Resources, you can compare the effects of market volatilities on Rio Tinto and Thunderstruck 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 Thunderstruck Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Thunderstruck Resources.
Diversification Opportunities for Rio Tinto and Thunderstruck Resources
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rio and Thunderstruck is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Thunderstruck Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thunderstruck Resources 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 Thunderstruck Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thunderstruck Resources has no effect on the direction of Rio Tinto i.e., Rio Tinto and Thunderstruck Resources go up and down completely randomly.
Pair Corralation between Rio Tinto and Thunderstruck Resources
Assuming the 90 days horizon Rio Tinto is expected to generate 12.66 times less return on investment than Thunderstruck Resources. But when comparing it to its historical volatility, Rio Tinto Group is 5.56 times less risky than Thunderstruck Resources. It trades about 0.02 of its potential returns per unit of risk. Thunderstruck Resources is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5.85 in Thunderstruck Resources on September 1, 2024 and sell it today you would lose (2.10) from holding Thunderstruck Resources or give up 35.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 87.12% |
| Values | Daily Returns |
Rio Tinto Group vs. Thunderstruck Resources
Performance |
| Timeline |
| Rio Tinto Group |
| Thunderstruck Resources |
Rio Tinto and Thunderstruck Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Thunderstruck Resources
The main advantage of trading using opposite Rio Tinto and Thunderstruck Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Thunderstruck 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 Thunderstruck Resources will offset losses from the drop in Thunderstruck Resources' 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 |
| Thunderstruck Resources vs. ATT Inc | Thunderstruck Resources vs. Merck Company | Thunderstruck Resources vs. Walt Disney | Thunderstruck Resources vs. Caterpillar |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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