Correlation Between Rio Tinto and Navigator Global

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

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

Diversification Opportunities for Rio Tinto and Navigator Global

0.4

Correlation Coefficient

Rio Tinto  Navigator Global

Very weak diversification

The 3 months correlation between Rio and Navigator is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Navigator Global Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navigator Global Inv 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 Navigator Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navigator Global Inv has no effect on the direction of Rio Tinto i.e., Rio Tinto and Navigator Global go up and down completely randomly.

Pair Corralation between Rio Tinto and Navigator Global

Assuming the 90 days trading horizon Rio Tinto is expected to generate 0.77 times more return on investment than Navigator Global. However, Rio Tinto is 1.3 times less risky than Navigator Global. It trades about 0.11 of its potential returns per unit of risk. Navigator Global Investments is currently generating about -0.03 per unit of risk. If you would invest  11,142  in Rio Tinto on September 13, 2024 and sell it today you would earn a total of  1,239  from holding Rio Tinto or generate 11.12% return on investment over 90 days.

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

Rio Tinto  vs.  Navigator Global Investments

Rio Tinto

Risk-Adjusted Performance

8 of 100

OK

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

Navigator Global Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Navigator Global Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Navigator Global is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rio Tinto and Navigator Global

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

The idea behind Rio Tinto and Navigator Global Investments 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.