Correlation Between Rio Tinto and OAR RESOURCES

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

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

Diversification Opportunities for Rio Tinto and OAR RESOURCES

-0.2

Correlation Coefficient

Rio Tinto  OAR RESOURCES

Good diversification

The 3 months correlation between Rio and OAR is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and OAR RESOURCES LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OAR RESOURCES LTD and Rio Tinto 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 Rio Tinto Group are associated (or correlated) with OAR RESOURCES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OAR RESOURCES LTD has no effect on the direction of Rio Tinto i.e., Rio Tinto and OAR RESOURCES go up and down completely randomly.

Pair Corralation between Rio Tinto and OAR RESOURCES

Assuming the 90 days trading horizon Rio Tinto Group is expected to under-perform the OAR RESOURCES. But the stock apears to be less risky and, when comparing its historical volatility, Rio Tinto Group is 16.28 times less risky than OAR RESOURCES. The stock trades about -0.07 of its potential returns per unit of risk. The OAR RESOURCES LTD is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1.00  in OAR RESOURCES LTD on September 23, 2024 and sell it today you would earn a total of  0.24  from holding OAR RESOURCES LTD or generate 24.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.73%
Values	Daily Returns

Rio Tinto Group  vs.  OAR RESOURCES LTD

Rio Tinto Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto Group are ranked lower than 1 (%) 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 latest stock price disturbance, may contribute to mid-run losses for the stockholders.

OAR RESOURCES LTD

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in OAR RESOURCES LTD are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, OAR RESOURCES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio Tinto and OAR RESOURCES

The main advantage of trading using opposite Rio Tinto and OAR RESOURCES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, OAR RESOURCES 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 OAR RESOURCES will offset losses from the drop in OAR RESOURCES's long position.

The idea behind Rio Tinto Group and OAR RESOURCES LTD 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.