Correlation Between Rio Tinto and Neurotech International

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

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

Diversification Opportunities for Rio Tinto and Neurotech International

-0.43

Correlation Coefficient

Rio Tinto  Neurotech International

Very good diversification

The 3 months correlation between Rio and Neurotech is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Neurotech International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neurotech International 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 Neurotech International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neurotech International has no effect on the direction of Rio Tinto i.e., Rio Tinto and Neurotech International go up and down completely randomly.

Pair Corralation between Rio Tinto and Neurotech International

Assuming the 90 days trading horizon Rio Tinto is expected to generate 0.4 times more return on investment than Neurotech International. However, Rio Tinto is 2.53 times less risky than Neurotech International. It trades about 0.09 of its potential returns per unit of risk. Neurotech International is currently generating about -0.06 per unit of risk. If you would invest  11,081  in Rio Tinto on September 15, 2024 and sell it today you would earn a total of  991.00  from holding Rio Tinto or generate 8.94% 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.  Neurotech International

Rio Tinto

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto are ranked lower than 6 (%) 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.

Neurotech International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neurotech International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Rio Tinto and Neurotech International

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

The idea behind Rio Tinto and Neurotech International 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.