Correlation Between Rio Tinto and Amaroq Minerals

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

Diversification Opportunities for Rio Tinto and Amaroq Minerals

-0.4

Correlation Coefficient

Rio Tinto  Amaroq Minerals

Very good diversification

The 3 months correlation between Rio and Amaroq is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto PLC and Amaroq Minerals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amaroq Minerals 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 Amaroq Minerals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amaroq Minerals has no effect on the direction of Rio Tinto i.e., Rio Tinto and Amaroq Minerals go up and down completely randomly.

Pair Corralation between Rio Tinto and Amaroq Minerals

Assuming the 90 days trading horizon Rio Tinto PLC is expected to under-perform the Amaroq Minerals. But the stock apears to be less risky and, when comparing its historical volatility, Rio Tinto PLC is 1.99 times less risky than Amaroq Minerals. The stock trades about -0.2 of its potential returns per unit of risk. The Amaroq Minerals is currently generating about 0.43 of returns per unit of risk over similar time horizon. If you would invest  8,000  in Amaroq Minerals on September 23, 2024 and sell it today you would earn a total of  2,215  from holding Amaroq Minerals or generate 27.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Rio Tinto PLC  vs.  Amaroq Minerals

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. In spite of rather sound technical and fundamental indicators, Rio Tinto is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Amaroq Minerals

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amaroq Minerals are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Amaroq Minerals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio Tinto and Amaroq Minerals

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

The idea behind Rio Tinto PLC and Amaroq Minerals 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.