Correlation Between Rio Tinto and Instituto Rosenbusch

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

Diversification Opportunities for Rio Tinto and Instituto Rosenbusch

-0.65

Correlation Coefficient

Rio Tinto  Instituto Rosenbusch

Excellent diversification

The 3 months correlation between Rio and Instituto is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto PLC and Instituto Rosenbusch SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Instituto Rosenbusch 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 Instituto Rosenbusch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Instituto Rosenbusch has no effect on the direction of Rio Tinto i.e., Rio Tinto and Instituto Rosenbusch go up and down completely randomly.

Pair Corralation between Rio Tinto and Instituto Rosenbusch

Assuming the 90 days trading horizon Rio Tinto PLC is expected to generate 0.68 times more return on investment than Instituto Rosenbusch. However, Rio Tinto PLC is 1.47 times less risky than Instituto Rosenbusch. It trades about 0.2 of its potential returns per unit of risk. Instituto Rosenbusch SA is currently generating about -0.11 per unit of risk. If you would invest  840,643  in Rio Tinto PLC on December 21, 2024 and sell it today you would earn a total of  174,357  from holding Rio Tinto PLC or generate 20.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Rio Tinto PLC  vs.  Instituto Rosenbusch SA

Rio Tinto PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto PLC are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Rio Tinto sustained solid returns over the last few months and may actually be approaching a breakup point.

Instituto Rosenbusch

Risk-Adjusted Performance

Very Weak

Over the last 90 days Instituto Rosenbusch SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Rio Tinto and Instituto Rosenbusch

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

The idea behind Rio Tinto PLC and Instituto Rosenbusch 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.