Correlation Between Rio Tinto and Black Rock
Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Black Rock 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 Black Rock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto and Black Rock Mining, you can compare the effects of market volatilities on Rio Tinto and Black Rock 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 Black Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Black Rock.
Diversification Opportunities for Rio Tinto and Black Rock
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Rio and Black is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Black Rock Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Rock Mining 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 Black Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Rock Mining has no effect on the direction of Rio Tinto i.e., Rio Tinto and Black Rock go up and down completely randomly.
Pair Corralation between Rio Tinto and Black Rock
Assuming the 90 days trading horizon Rio Tinto is expected to generate 0.3 times more return on investment than Black Rock. However, Rio Tinto is 3.35 times less risky than Black Rock. It trades about 0.07 of its potential returns per unit of risk. Black Rock Mining is currently generating about -0.12 per unit of risk. If you would invest 11,432 in Rio Tinto on December 28, 2024 and sell it today you would earn a total of 577.00 from holding Rio Tinto or generate 5.05% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Rio Tinto vs. Black Rock Mining
Performance |
Timeline |
Rio Tinto |
Black Rock Mining |
Rio Tinto and Black Rock Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Rio Tinto and Black Rock
The main advantage of trading using opposite Rio Tinto and Black Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, Black Rock 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 Black Rock will offset losses from the drop in Black Rock's long position.Rio Tinto vs. Black Rock Mining | Rio Tinto vs. MetalsGrove Mining | Rio Tinto vs. Computershare | Rio Tinto vs. Technology One |
Black Rock vs. Betmakers Technology Group | Black Rock vs. Thorney Technologies | Black Rock vs. Bailador Technology Invest | Black Rock vs. COAST ENTERTAINMENT HOLDINGS |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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