Correlation Between Avarone Metals and Rio Tinto

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

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

Diversification Opportunities for Avarone Metals and Rio Tinto

0.0

Correlation Coefficient

Avarone Metals  Rio Tinto

Pay attention - limited upside

The 3 months correlation between Avarone and Rio is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Avarone Metals 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 Avarone Metals 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 Avarone Metals 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 Avarone Metals i.e., Avarone Metals and Rio Tinto go up and down completely randomly.

Pair Corralation between Avarone Metals and Rio Tinto

If you would invest  5,551  in Rio Tinto Group on December 29, 2024 and sell it today you would earn a total of  655.00  from holding Rio Tinto Group or generate 11.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	81.25%
Values	Daily Returns

Avarone Metals  vs.  Rio Tinto Group

Avarone Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avarone Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Avarone Metals 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

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 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avarone Metals and Rio Tinto

The main advantage of trading using opposite Avarone Metals and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avarone Metals 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 Avarone Metals 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.