Correlation Between GMK Norilskiy and Rio Tinto

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

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

Diversification Opportunities for GMK Norilskiy and Rio Tinto

0.0

Correlation Coefficient

GMK Norilskiy  Rio Tinto

Pay attention - limited upside

The 3 months correlation between GMK and Rio is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GMK Norilskiy Nikel 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 GMK Norilskiy 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 GMK Norilskiy Nikel 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 GMK Norilskiy i.e., GMK Norilskiy and Rio Tinto go up and down completely randomly.

Pair Corralation between GMK Norilskiy and Rio Tinto

If you would invest  7,364  in Rio Tinto Group on September 16, 2024 and sell it today you would earn a total of  231.00  from holding Rio Tinto Group or generate 3.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.54%
Values	Daily Returns

GMK Norilskiy Nikel  vs.  Rio Tinto Group

GMK Norilskiy Nikel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMK Norilskiy Nikel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, GMK Norilskiy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Rio Tinto Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Rio Tinto is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with GMK Norilskiy and Rio Tinto

The main advantage of trading using opposite GMK Norilskiy and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMK Norilskiy 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 GMK Norilskiy Nikel 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.