Correlation Between Rio Tinto and Mirgor SA

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

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

Diversification Opportunities for Rio Tinto and Mirgor SA

-0.58

Correlation Coefficient

Rio Tinto  Mirgor SA

Excellent diversification

The 3 months correlation between Rio and Mirgor is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto PLC and Mirgor SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mirgor SA 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 PLC are associated (or correlated) with Mirgor SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mirgor SA has no effect on the direction of Rio Tinto i.e., Rio Tinto and Mirgor SA go up and down completely randomly.

Pair Corralation between Rio Tinto and Mirgor SA

Assuming the 90 days trading horizon Rio Tinto PLC is expected to generate 0.88 times more return on investment than Mirgor SA. However, Rio Tinto PLC is 1.14 times less risky than Mirgor SA. It trades about 0.15 of its potential returns per unit of risk. Mirgor SA is currently generating about 0.13 per unit of risk. If you would invest  879,000  in Rio Tinto PLC on October 27, 2024 and sell it today you would earn a total of  31,000  from holding Rio Tinto PLC or generate 3.53% 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 PLC  vs.  Mirgor SA

Rio Tinto PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio Tinto PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Rio Tinto is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Mirgor SA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Mirgor SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Mirgor SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio Tinto and Mirgor SA

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

The idea behind Rio Tinto PLC and Mirgor SA 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.