Correlation Between Suncorp and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Suncorp 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 Suncorp and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Suncorp Group and Rio Tinto, you can compare the effects of market volatilities on Suncorp 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 Suncorp with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suncorp and Rio Tinto.
Diversification Opportunities for Suncorp and Rio Tinto
Pay attention - limited upside
The 3 months correlation between Suncorp and Rio is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Suncorp Group and Rio Tinto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto and Suncorp 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 Suncorp Group 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 has no effect on the direction of Suncorp i.e., Suncorp and Rio Tinto go up and down completely randomly.
Pair Corralation between Suncorp and Rio Tinto
Assuming the 90 days trading horizon Suncorp Group is expected to generate 0.88 times more return on investment than Rio Tinto. However, Suncorp Group is 1.14 times less risky than Rio Tinto. It trades about 0.15 of its potential returns per unit of risk. Rio Tinto is currently generating about -0.02 per unit of risk. If you would invest 1,573 in Suncorp Group on August 31, 2024 and sell it today you would earn a total of 397.00 from holding Suncorp Group or generate 25.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Suncorp Group vs. Rio Tinto
Performance |
| Timeline |
| Suncorp Group |
| Rio Tinto |
Suncorp and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Suncorp and Rio Tinto
The main advantage of trading using opposite Suncorp and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suncorp 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.| Suncorp vs. Oceania Healthcare | Suncorp vs. Regis Healthcare | Suncorp vs. Retail Food Group | Suncorp vs. Healthco Healthcare and |
| Rio Tinto vs. Autosports Group | Rio Tinto vs. Sandon Capital Investments | Rio Tinto vs. Australian United Investment | Rio Tinto vs. MFF Capital Investments |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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