Correlation Between Rio Tinto and COG Financial

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Can any of the company-specific risk be diversified away by investing in both Rio Tinto and COG Financial 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 COG Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Tinto and COG Financial Services, you can compare the effects of market volatilities on Rio Tinto and COG Financial 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 COG Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and COG Financial.

Diversification Opportunities for Rio Tinto and COG Financial

-0.06
  Correlation Coefficient

Good diversification

The 3 months correlation between Rio and COG is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and COG Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COG Financial Services 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 COG Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COG Financial Services has no effect on the direction of Rio Tinto i.e., Rio Tinto and COG Financial go up and down completely randomly.

Pair Corralation between Rio Tinto and COG Financial

Assuming the 90 days trading horizon Rio Tinto is expected to generate 0.59 times more return on investment than COG Financial. However, Rio Tinto is 1.69 times less risky than COG Financial. It trades about 0.04 of its potential returns per unit of risk. COG Financial Services is currently generating about 0.01 per unit of risk. If you would invest  11,168  in Rio Tinto on October 22, 2024 and sell it today you would earn a total of  706.00  from holding Rio Tinto or generate 6.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Rio Tinto  vs.  COG Financial Services

 Performance 
       Timeline  
Rio Tinto 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Rio Tinto has generated negative risk-adjusted returns adding no value to investors with long positions. 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.
COG Financial Services 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days COG Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Rio Tinto and COG Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rio Tinto and COG Financial

The main advantage of trading using opposite Rio Tinto and COG Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, COG Financial 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 COG Financial will offset losses from the drop in COG Financial's long position.
The idea behind Rio Tinto and COG Financial Services 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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