Correlation Between Rio Tinto and Event Hospitality

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

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

Diversification Opportunities for Rio Tinto and Event Hospitality

-0.14

Correlation Coefficient

Rio Tinto  Event Hospitality

Good diversification

The 3 months correlation between Rio and Event is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Event Hospitality and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Event Hospitality 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 Event Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Event Hospitality has no effect on the direction of Rio Tinto i.e., Rio Tinto and Event Hospitality go up and down completely randomly.

Pair Corralation between Rio Tinto and Event Hospitality

Assuming the 90 days trading horizon Rio Tinto is expected to under-perform the Event Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Rio Tinto is 1.18 times less risky than Event Hospitality. The stock trades about -0.02 of its potential returns per unit of risk. The Event Hospitality and is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,183  in Event Hospitality and on September 25, 2024 and sell it today you would lose (47.00) from holding Event Hospitality and or give up 3.97% of portfolio value over 90 days.

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

Rio Tinto  vs.  Event Hospitality and

Rio Tinto

Risk-Adjusted Performance

0 of 100

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.

Event Hospitality

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Event Hospitality and are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Event Hospitality may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rio Tinto and Event Hospitality

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

The idea behind Rio Tinto and Event Hospitality and 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.