Correlation Between INTER CARS and Rio Tinto

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

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

Diversification Opportunities for INTER CARS and Rio Tinto

0.09

Correlation Coefficient

INTER CARS  Rio Tinto

Significant diversification

The 3 months correlation between INTER and Rio is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding INTER CARS SA 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 INTER CARS 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 INTER CARS SA 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 INTER CARS i.e., INTER CARS and Rio Tinto go up and down completely randomly.

Pair Corralation between INTER CARS and Rio Tinto

Assuming the 90 days horizon INTER CARS SA is expected to under-perform the Rio Tinto. In addition to that, INTER CARS is 1.35 times more volatile than Rio Tinto Group. It trades about 0.0 of its total potential returns per unit of risk. Rio Tinto Group is currently generating about 0.04 per unit of volatility. If you would invest  6,157  in Rio Tinto Group on September 12, 2024 and sell it today you would earn a total of  1,073  from holding Rio Tinto Group or generate 17.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

INTER CARS SA  vs.  Rio Tinto Group

INTER CARS SA

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INTER CARS SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, INTER CARS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Rio Tinto Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Rio Tinto may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with INTER CARS and Rio Tinto

The main advantage of trading using opposite INTER CARS and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INTER CARS 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 INTER CARS SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.