Correlation Between Eidesvik Offshore and Rio Tinto

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

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

Diversification Opportunities for Eidesvik Offshore and Rio Tinto

-0.25

Correlation Coefficient

Eidesvik Offshore  Rio Tinto

Very good diversification

The 3 months correlation between Eidesvik and Rio is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Eidesvik Offshore ASA 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 Eidesvik Offshore 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 Eidesvik Offshore ASA 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 Eidesvik Offshore i.e., Eidesvik Offshore and Rio Tinto go up and down completely randomly.

Pair Corralation between Eidesvik Offshore and Rio Tinto

Assuming the 90 days trading horizon Eidesvik Offshore ASA is expected to under-perform the Rio Tinto. In addition to that, Eidesvik Offshore is 1.37 times more volatile than Rio Tinto Group. It trades about -0.11 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  6,721  in Rio Tinto Group on September 2, 2024 and sell it today you would earn a total of  522.00  from holding Rio Tinto Group or generate 7.77% return on investment over 90 days.

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

Eidesvik Offshore ASA  vs.  Rio Tinto Group

Eidesvik Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eidesvik Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Rio Tinto Group

Risk-Adjusted Performance

6 of 100

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 fragile basic indicators, Rio Tinto may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eidesvik Offshore and Rio Tinto

The main advantage of trading using opposite Eidesvik Offshore and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eidesvik Offshore 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 Eidesvik Offshore ASA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.