Correlation Between Alternative Investment and Rio Tinto

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

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

Diversification Opportunities for Alternative Investment and Rio Tinto

0.14

Correlation Coefficient

Alternative Investment  Rio Tinto

Average diversification

The 3 months correlation between Alternative and Rio is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Alternative Investment Trust and Rio Tinto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto and Alternative Investment 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 Alternative Investment Trust 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 Alternative Investment i.e., Alternative Investment and Rio Tinto go up and down completely randomly.

Pair Corralation between Alternative Investment and Rio Tinto

Assuming the 90 days trading horizon Alternative Investment Trust is expected to generate 0.46 times more return on investment than Rio Tinto. However, Alternative Investment Trust is 2.16 times less risky than Rio Tinto. It trades about 0.21 of its potential returns per unit of risk. Rio Tinto is currently generating about 0.03 per unit of risk. If you would invest  140.00  in Alternative Investment Trust on October 23, 2024 and sell it today you would earn a total of  11.00  from holding Alternative Investment Trust or generate 7.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Alternative Investment Trust  vs.  Rio Tinto

Alternative Investment

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alternative Investment Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Alternative Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Rio Tinto

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Rio Tinto is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Alternative Investment and Rio Tinto

The main advantage of trading using opposite Alternative Investment and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alternative Investment 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 Alternative Investment Trust and Rio Tinto 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.