Correlation Between Qurate Retail and Rio Tinto

Can any of the company-specific risk be diversified away by investing in both Qurate Retail 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 Qurate Retail and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Qurate Retail Series and Rio Tinto PLC, you can compare the effects of market volatilities on Qurate Retail 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 Qurate Retail with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Qurate Retail and Rio Tinto.

Diversification Opportunities for Qurate Retail and Rio Tinto

0.46

Correlation Coefficient

Qurate Retail  Rio Tinto

Very weak diversification

The 3 months correlation between Qurate and Rio is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Qurate Retail Series and Rio Tinto PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto PLC and Qurate Retail 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 Qurate Retail Series 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 PLC has no effect on the direction of Qurate Retail i.e., Qurate Retail and Rio Tinto go up and down completely randomly.

Pair Corralation between Qurate Retail and Rio Tinto

Assuming the 90 days trading horizon Qurate Retail Series is expected to under-perform the Rio Tinto. In addition to that, Qurate Retail is 2.86 times more volatile than Rio Tinto PLC. It trades about -0.18 of its total potential returns per unit of risk. Rio Tinto PLC is currently generating about -0.2 per unit of volatility. If you would invest  502,000  in Rio Tinto PLC on October 4, 2024 and sell it today you would lose (25,600) from holding Rio Tinto PLC or give up 5.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Qurate Retail Series  vs.  Rio Tinto PLC

Qurate Retail Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Qurate Retail Series has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Rio Tinto PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio Tinto PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Qurate Retail and Rio Tinto

The main advantage of trading using opposite Qurate Retail and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Qurate Retail 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 Qurate Retail Series and Rio Tinto PLC 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.