Correlation Between Regis Healthcare and Rio Tinto

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

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

Diversification Opportunities for Regis Healthcare and Rio Tinto

0.6

Correlation Coefficient

Regis Healthcare  Rio Tinto

Poor diversification

The 3 months correlation between Regis and Rio is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Regis Healthcare and Rio Tinto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto and Regis Healthcare 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 Regis Healthcare 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 has no effect on the direction of Regis Healthcare i.e., Regis Healthcare and Rio Tinto go up and down completely randomly.

Pair Corralation between Regis Healthcare and Rio Tinto

Assuming the 90 days trading horizon Regis Healthcare is expected to generate 1.19 times more return on investment than Rio Tinto. However, Regis Healthcare is 1.19 times more volatile than Rio Tinto. It trades about 0.15 of its potential returns per unit of risk. Rio Tinto is currently generating about 0.13 per unit of risk. If you would invest  541.00  in Regis Healthcare on September 12, 2024 and sell it today you would earn a total of  102.00  from holding Regis Healthcare or generate 18.85% return on investment over 90 days.

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

Regis Healthcare  vs.  Rio Tinto

Regis Healthcare

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regis Healthcare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Regis Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Rio Tinto

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Rio Tinto unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regis Healthcare and Rio Tinto

The main advantage of trading using opposite Regis Healthcare and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regis Healthcare 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 Regis Healthcare and Rio Tinto 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.