Correlation Between Cornish Metals and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Cornish Metals and Rio Tinto 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 Cornish Metals and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cornish Metals and Rio Tinto ADR, you can compare the effects of market volatilities on Cornish Metals and Rio Tinto 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 Cornish Metals with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cornish Metals and Rio Tinto.
Diversification Opportunities for Cornish Metals and Rio Tinto
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cornish and Rio is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cornish Metals and Rio Tinto ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto ADR and Cornish Metals 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 Cornish Metals are associated (or correlated) with Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto ADR has no effect on the direction of Cornish Metals i.e., Cornish Metals and Rio Tinto go up and down completely randomly.
Pair Corralation between Cornish Metals and Rio Tinto
Assuming the 90 days horizon Cornish Metals is expected to generate 8.24 times more return on investment than Rio Tinto. However, Cornish Metals is 8.24 times more volatile than Rio Tinto ADR. It trades about 0.04 of its potential returns per unit of risk. Rio Tinto ADR is currently generating about -0.05 per unit of risk. If you would invest 8.00 in Cornish Metals on August 25, 2024 and sell it today you would lose (2.00) from holding Cornish Metals or give up 25.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Cornish Metals vs. Rio Tinto ADR
Performance |
| Timeline |
| Cornish Metals |
| Rio Tinto ADR |
Cornish Metals and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cornish Metals and Rio Tinto
The main advantage of trading using opposite Cornish Metals and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cornish Metals position performs unexpectedly, Rio Tinto 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 Rio Tinto will offset losses from the drop in Rio Tinto's long position.| Cornish Metals vs. Ascendant Resources | Cornish Metals vs. Cantex Mine Development | Cornish Metals vs. Amarc Resources | Cornish Metals vs. Sterling Metals Corp |
| Rio Tinto vs. Vale SA ADR | Rio Tinto vs. Teck Resources Ltd | Rio Tinto vs. MP Materials Corp | Rio Tinto vs. Lithium Americas Corp |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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