Correlation Between Volt Lithium and Rio Tinto

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Can any of the company-specific risk be diversified away by investing in both Volt Lithium 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 Volt Lithium and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Volt Lithium Corp and Rio Tinto Group, you can compare the effects of market volatilities on Volt Lithium 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 Volt Lithium with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volt Lithium and Rio Tinto.

Diversification Opportunities for Volt Lithium and Rio Tinto

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Volt and Rio is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Volt Lithium Corp and Rio Tinto Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto Group and Volt Lithium 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 Volt Lithium Corp 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 Group has no effect on the direction of Volt Lithium i.e., Volt Lithium and Rio Tinto go up and down completely randomly.

Pair Corralation between Volt Lithium and Rio Tinto

Assuming the 90 days horizon Volt Lithium Corp is expected to generate 3.09 times more return on investment than Rio Tinto. However, Volt Lithium is 3.09 times more volatile than Rio Tinto Group. It trades about 0.06 of its potential returns per unit of risk. Rio Tinto Group is currently generating about 0.02 per unit of risk. If you would invest  14.00  in Volt Lithium Corp on September 1, 2024 and sell it today you would earn a total of  7.00  from holding Volt Lithium Corp or generate 50.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Volt Lithium Corp  vs.  Rio Tinto Group

 Performance 
       Timeline  
Volt Lithium Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Volt Lithium Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Rio Tinto Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Rio Tinto Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Rio Tinto is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Volt Lithium and Rio Tinto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Volt Lithium and Rio Tinto

The main advantage of trading using opposite Volt Lithium and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volt Lithium 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.
The idea behind Volt Lithium Corp and Rio Tinto Group 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.
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.

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