Correlation Between Boyd Gaming and Rio Tinto

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

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

Diversification Opportunities for Boyd Gaming and Rio Tinto

0.29

Correlation Coefficient

Boyd Gaming  Rio Tinto

Modest diversification

The 3 months correlation between Boyd and Rio is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Boyd Gaming 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 Boyd Gaming 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 Boyd Gaming 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 Boyd Gaming i.e., Boyd Gaming and Rio Tinto go up and down completely randomly.

Pair Corralation between Boyd Gaming and Rio Tinto

Assuming the 90 days trading horizon Boyd Gaming is expected to under-perform the Rio Tinto. In addition to that, Boyd Gaming is 1.45 times more volatile than Rio Tinto Group. It trades about -0.07 of its total potential returns per unit of risk. Rio Tinto Group is currently generating about 0.08 per unit of volatility. If you would invest  5,529  in Rio Tinto Group on December 19, 2024 and sell it today you would earn a total of  310.00  from holding Rio Tinto Group or generate 5.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.33%
Values	Daily Returns

Boyd Gaming  vs.  Rio Tinto Group

Boyd Gaming

Risk-Adjusted Performance

Very Weak

Over the last 90 days Boyd Gaming has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Rio Tinto Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Rio Tinto is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Boyd Gaming and Rio Tinto

The main advantage of trading using opposite Boyd Gaming and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Boyd Gaming 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 Boyd Gaming 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.