Correlation Between Griffin Mining and Rio Tinto

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

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

Diversification Opportunities for Griffin Mining and Rio Tinto

0.52

Correlation Coefficient

Griffin Mining  Rio Tinto

Very weak diversification

The 3 months correlation between Griffin and Rio is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Griffin Mining and Rio Tinto PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto PLC and Griffin Mining 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 Griffin Mining 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 PLC has no effect on the direction of Griffin Mining i.e., Griffin Mining and Rio Tinto go up and down completely randomly.

Pair Corralation between Griffin Mining and Rio Tinto

Assuming the 90 days trading horizon Griffin Mining is expected to generate 1.41 times more return on investment than Rio Tinto. However, Griffin Mining is 1.41 times more volatile than Rio Tinto PLC. It trades about 0.08 of its potential returns per unit of risk. Rio Tinto PLC is currently generating about 0.0 per unit of risk. If you would invest  7,590  in Griffin Mining on October 5, 2024 and sell it today you would earn a total of  7,510  from holding Griffin Mining or generate 98.95% return on investment over 90 days.

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

Griffin Mining  vs.  Rio Tinto PLC

Griffin Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Griffin Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Griffin Mining is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Rio Tinto PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio Tinto PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Griffin Mining and Rio Tinto

The main advantage of trading using opposite Griffin Mining and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Griffin Mining 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 Griffin Mining and Rio Tinto PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.