Correlation Between Matador Mining and Rio2

Can any of the company-specific risk be diversified away by investing in both Matador Mining and Rio2 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 Matador Mining and Rio2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Matador Mining Limited and Rio2 Limited, you can compare the effects of market volatilities on Matador Mining and Rio2 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 Matador Mining with a short position of Rio2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matador Mining and Rio2.

Diversification Opportunities for Matador Mining and Rio2

0.0

Correlation Coefficient

Matador Mining  Rio2

Pay attention - limited upside

The 3 months correlation between Matador and Rio2 is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Matador Mining Limited and Rio2 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio2 Limited and Matador 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 Matador Mining Limited are associated (or correlated) with Rio2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio2 Limited has no effect on the direction of Matador Mining i.e., Matador Mining and Rio2 go up and down completely randomly.

Pair Corralation between Matador Mining and Rio2

If you would invest  42.00  in Rio2 Limited on December 29, 2024 and sell it today you would earn a total of  22.00  from holding Rio2 Limited or generate 52.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Matador Mining Limited  vs.  Rio2 Limited

Matador Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Matador Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, Matador Mining is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Rio2 Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rio2 Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Rio2 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Matador Mining and Rio2

The main advantage of trading using opposite Matador Mining and Rio2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matador Mining position performs unexpectedly, Rio2 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 Rio2 will offset losses from the drop in Rio2's long position.

The idea behind Matador Mining Limited and Rio2 Limited 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.