Correlation Between Allianz Technology and Rio Tinto

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

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

Diversification Opportunities for Allianz Technology and Rio Tinto

-0.52

Correlation Coefficient

Allianz Technology  Rio Tinto

Excellent diversification

The 3 months correlation between Allianz and Rio is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Allianz Technology Trust 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 Allianz Technology 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 Allianz Technology 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 PLC has no effect on the direction of Allianz Technology i.e., Allianz Technology and Rio Tinto go up and down completely randomly.

Pair Corralation between Allianz Technology and Rio Tinto

Assuming the 90 days trading horizon Allianz Technology is expected to generate 2.48 times less return on investment than Rio Tinto. In addition to that, Allianz Technology is 1.28 times more volatile than Rio Tinto PLC. It trades about 0.14 of its total potential returns per unit of risk. Rio Tinto PLC is currently generating about 0.43 per unit of volatility. If you would invest  469,200  in Rio Tinto PLC on October 22, 2024 and sell it today you would earn a total of  34,900  from holding Rio Tinto PLC or generate 7.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Allianz Technology Trust  vs.  Rio Tinto PLC

Allianz Technology Trust

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allianz Technology Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Allianz Technology exhibited solid returns over the last few months and may actually be approaching a breakup point.

Rio Tinto PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Rio Tinto is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Allianz Technology and Rio Tinto

The main advantage of trading using opposite Allianz Technology and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Allianz Technology 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 Allianz Technology Trust 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.