Correlation Between Rio Tinto and Bluebet Holdings

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

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

Diversification Opportunities for Rio Tinto and Bluebet Holdings

0.13

Correlation Coefficient

Rio Tinto  Bluebet Holdings

Average diversification

The 3 months correlation between Rio and Bluebet is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Bluebet Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluebet Holdings and Rio Tinto 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 Rio Tinto are associated (or correlated) with Bluebet Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluebet Holdings has no effect on the direction of Rio Tinto i.e., Rio Tinto and Bluebet Holdings go up and down completely randomly.

Pair Corralation between Rio Tinto and Bluebet Holdings

Assuming the 90 days trading horizon Rio Tinto is expected to generate 2.95 times less return on investment than Bluebet Holdings. But when comparing it to its historical volatility, Rio Tinto is 3.29 times less risky than Bluebet Holdings. It trades about 0.06 of its potential returns per unit of risk. Bluebet Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Bluebet Holdings on December 20, 2024 and sell it today you would earn a total of  3.00  from holding Bluebet Holdings or generate 10.34% return on investment over 90 days.

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

Rio Tinto  vs.  Bluebet Holdings

Rio Tinto

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Rio Tinto is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bluebet Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bluebet Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Bluebet Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio Tinto and Bluebet Holdings

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

The idea behind Rio Tinto and Bluebet Holdings 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.