Correlation Between Rio Tinto and Aptamer Group

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

Diversification Opportunities for Rio Tinto and Aptamer Group

-0.62

Correlation Coefficient

Rio Tinto  Aptamer Group

Excellent diversification

The 3 months correlation between Rio and Aptamer is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto PLC and Aptamer Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptamer Group PLC 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 Aptamer Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptamer Group PLC has no effect on the direction of Rio Tinto i.e., Rio Tinto and Aptamer Group go up and down completely randomly.

Pair Corralation between Rio Tinto and Aptamer Group

Assuming the 90 days trading horizon Rio Tinto PLC is expected to generate 0.3 times more return on investment than Aptamer Group. However, Rio Tinto PLC is 3.31 times less risky than Aptamer Group. It trades about -0.18 of its potential returns per unit of risk. Aptamer Group PLC is currently generating about -0.16 per unit of risk. If you would invest  500,000  in Rio Tinto PLC on October 13, 2024 and sell it today you would lose (18,200) from holding Rio Tinto PLC or give up 3.64% of portfolio value over 90 days.

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

Rio Tinto PLC  vs.  Aptamer Group PLC

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.

Aptamer Group PLC

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aptamer Group PLC are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Aptamer Group unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio Tinto and Aptamer Group

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

The idea behind Rio Tinto PLC and Aptamer Group PLC 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.