Correlation Between Rio Tinto and Regis Healthcare

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

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

Diversification Opportunities for Rio Tinto and Regis Healthcare

0.3

Correlation Coefficient

Rio Tinto  Regis Healthcare

Weak diversification

The 3 months correlation between Rio and Regis is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Regis Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regis Healthcare 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 Regis Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regis Healthcare has no effect on the direction of Rio Tinto i.e., Rio Tinto and Regis Healthcare go up and down completely randomly.

Pair Corralation between Rio Tinto and Regis Healthcare

Assuming the 90 days trading horizon Rio Tinto is expected to generate 2.32 times less return on investment than Regis Healthcare. But when comparing it to its historical volatility, Rio Tinto is 1.35 times less risky than Regis Healthcare. It trades about 0.07 of its potential returns per unit of risk. Regis Healthcare is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  611.00  in Regis Healthcare on December 28, 2024 and sell it today you would earn a total of  77.00  from holding Regis Healthcare or generate 12.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Rio Tinto  vs.  Regis Healthcare

Rio Tinto

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Regis Healthcare

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regis Healthcare are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Regis Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio Tinto and Regis Healthcare

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

The idea behind Rio Tinto and Regis Healthcare 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.