Correlation Between Rio Tinto and Wt Financial

Can any of the company-specific risk be diversified away by investing in both Rio Tinto and Wt 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 Wt 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 Wt Financial Group, you can compare the effects of market volatilities on Rio Tinto and Wt 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 Wt Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and Wt Financial.

Diversification Opportunities for Rio Tinto and Wt Financial

-0.42

Correlation Coefficient

Rio Tinto  Wt Financial

Very good diversification

The 3 months correlation between Rio and WTL is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto and Wt Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wt Financial Group 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 Wt Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wt Financial Group has no effect on the direction of Rio Tinto i.e., Rio Tinto and Wt Financial go up and down completely randomly.

Pair Corralation between Rio Tinto and Wt Financial

Assuming the 90 days trading horizon Rio Tinto is expected to generate 0.42 times more return on investment than Wt Financial. However, Rio Tinto is 2.4 times less risky than Wt Financial. It trades about -0.02 of its potential returns per unit of risk. Wt Financial Group is currently generating about -0.01 per unit of risk. If you would invest  11,710  in Rio Tinto on September 27, 2024 and sell it today you would lose (94.00) from holding Rio Tinto or give up 0.8% of portfolio value over 90 days.

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

Rio Tinto  vs.  Wt Financial Group

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Wt Financial Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wt Financial Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Wt Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio Tinto and Wt Financial

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

The idea behind Rio Tinto and Wt Financial Group 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.