Correlation Between ANZ Group and Rio Tinto

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

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

Diversification Opportunities for ANZ Group and Rio Tinto

-0.22

Correlation Coefficient

ANZ Group  Rio Tinto

Very good diversification

The 3 months correlation between ANZ and Rio is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding ANZ Group Holdings and Rio Tinto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto and ANZ Group 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 ANZ Group Holdings 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 ANZ Group i.e., ANZ Group and Rio Tinto go up and down completely randomly.

Pair Corralation between ANZ Group and Rio Tinto

Assuming the 90 days trading horizon ANZ Group Holdings is expected to under-perform the Rio Tinto. But the stock apears to be less risky and, when comparing its historical volatility, ANZ Group Holdings is 4.67 times less risky than Rio Tinto. The stock trades about -0.05 of its potential returns per unit of risk. The Rio Tinto is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  11,432  in Rio Tinto on December 28, 2024 and sell it today you would earn a total of  694.00  from holding Rio Tinto or generate 6.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

ANZ Group Holdings  vs.  Rio Tinto

ANZ Group Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days ANZ Group Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ANZ Group is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Rio Tinto

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rio Tinto may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ANZ Group and Rio Tinto

The main advantage of trading using opposite ANZ Group and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANZ Group 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 ANZ Group Holdings 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.