Correlation Between Rio Tinto and Zacapa Resources
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Zacapa 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 Zacapa 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 Zacapa Resources, you can compare the effects of market volatilities on Rio Tinto and Zacapa 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 Zacapa Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Zacapa Resources.
Diversification Opportunities for Rio Tinto and Zacapa Resources
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rio and Zacapa is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Zacapa Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zacapa 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 Zacapa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zacapa Resources has no effect on the direction of Rio Tinto i.e., Rio Tinto and Zacapa Resources go up and down completely randomly.
Pair Corralation between Rio Tinto and Zacapa Resources
Assuming the 90 days horizon Rio Tinto Group is expected to generate 0.42 times more return on investment than Zacapa Resources. However, Rio Tinto Group is 2.4 times less risky than Zacapa Resources. It trades about 0.03 of its potential returns per unit of risk. Zacapa Resources is currently generating about -0.06 per unit of risk. If you would invest 5,740 in Rio Tinto Group on August 29, 2024 and sell it today you would earn a total of 728.00 from holding Rio Tinto Group or generate 12.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 16.31% |
| Values | Daily Returns |
Rio Tinto Group vs. Zacapa Resources
Performance |
| Timeline |
| Rio Tinto Group |
| Zacapa Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Rio Tinto and Zacapa Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Tinto and Zacapa Resources
The main advantage of trading using opposite Rio Tinto and Zacapa Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Zacapa 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 Zacapa Resources will offset losses from the drop in Zacapa Resources' long position.The idea behind Rio Tinto Group and Zacapa Resources pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Zacapa Resources vs. Pampa Metals | Zacapa Resources vs. Progressive Planet Solutions | Zacapa Resources vs. Searchlight Resources | Zacapa Resources vs. Durango Resources |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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