Correlation Between EMX Royalty and Rio Tinto

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

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

Diversification Opportunities for EMX Royalty and Rio Tinto

0.52

Correlation Coefficient

EMX Royalty  Rio Tinto

Very weak diversification

The 3 months correlation between EMX and Rio is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding EMX Royalty Corp 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 EMX Royalty 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 EMX Royalty Corp 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 EMX Royalty i.e., EMX Royalty and Rio Tinto go up and down completely randomly.

Pair Corralation between EMX Royalty and Rio Tinto

Considering the 90-day investment horizon EMX Royalty Corp is expected to generate 1.29 times more return on investment than Rio Tinto. However, EMX Royalty is 1.29 times more volatile than Rio Tinto ADR. It trades about -0.01 of its potential returns per unit of risk. Rio Tinto ADR is currently generating about -0.17 per unit of risk. If you would invest  177.00  in EMX Royalty Corp on October 4, 2024 and sell it today you would lose (4.00) from holding EMX Royalty Corp or give up 2.26% of portfolio value over 90 days.

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

EMX Royalty Corp  vs.  Rio Tinto ADR

EMX Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMX Royalty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, EMX Royalty 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

0 of 100

Very Weak

Over the last 90 days Rio Tinto ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with EMX Royalty and Rio Tinto

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