Correlation Between Focus Graphite and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both Focus Graphite 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 Focus Graphite and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Focus Graphite and Rio Tinto Group, you can compare the effects of market volatilities on Focus Graphite 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 Focus Graphite with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Focus Graphite and Rio Tinto.
Diversification Opportunities for Focus Graphite and Rio Tinto
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Focus and Rio is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Focus Graphite 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 Focus Graphite 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 Focus Graphite 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 Focus Graphite i.e., Focus Graphite and Rio Tinto go up and down completely randomly.
Pair Corralation between Focus Graphite and Rio Tinto
Assuming the 90 days horizon Focus Graphite is expected to generate 5.15 times more return on investment than Rio Tinto. However, Focus Graphite is 5.15 times more volatile than Rio Tinto Group. It trades about -0.03 of its potential returns per unit of risk. Rio Tinto Group is currently generating about -0.21 per unit of risk. If you would invest 7.00 in Focus Graphite on December 5, 2024 and sell it today you would lose (1.00) from holding Focus Graphite or give up 14.29% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Focus Graphite vs. Rio Tinto Group
Performance |
Timeline |
Focus Graphite |
Rio Tinto Group |
Focus Graphite and Rio Tinto Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Focus Graphite and Rio Tinto
The main advantage of trading using opposite Focus Graphite and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Focus Graphite 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.Focus Graphite vs. Northern Graphite | Focus Graphite vs. Syrah Resources Limited | Focus Graphite vs. Altura Mining Limited | Focus Graphite vs. Vulcan Minerals |
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Check out your portfolio center.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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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