Correlation Between First American and Rio Tinto

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

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

Diversification Opportunities for First American and Rio Tinto

0.0

Correlation Coefficient

First American  Rio Tinto

Pay attention - limited upside

The 3 months correlation between First and Rio is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First American Silver and Rio Tinto ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto ADR and First American 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 First American Silver 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 ADR has no effect on the direction of First American i.e., First American and Rio Tinto go up and down completely randomly.

Pair Corralation between First American and Rio Tinto

If you would invest  5,930  in Rio Tinto ADR on December 17, 2024 and sell it today you would earn a total of  374.00  from holding Rio Tinto ADR or generate 6.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.31%
Values	Daily Returns

First American Silver  vs.  Rio Tinto ADR

First American Silver

Risk-Adjusted Performance

Very Weak

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

Rio Tinto ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto ADR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Rio Tinto may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First American and Rio Tinto

The main advantage of trading using opposite First American and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First American 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 First American Silver and Rio Tinto ADR 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.