Correlation Between Rio Tinto and Cardiff Property

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

Diversification Opportunities for Rio Tinto and Cardiff Property

-0.39

Correlation Coefficient

Rio Tinto  Cardiff Property

Very good diversification

The 3 months correlation between Rio and Cardiff is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto PLC and Cardiff Property PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardiff Property 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 Cardiff Property. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardiff Property PLC has no effect on the direction of Rio Tinto i.e., Rio Tinto and Cardiff Property go up and down completely randomly.

Pair Corralation between Rio Tinto and Cardiff Property

Assuming the 90 days trading horizon Rio Tinto PLC is expected to under-perform the Cardiff Property. In addition to that, Rio Tinto is 2.69 times more volatile than Cardiff Property PLC. It trades about -0.01 of its total potential returns per unit of risk. Cardiff Property PLC is currently generating about 0.01 per unit of volatility. If you would invest  237,564  in Cardiff Property PLC on September 29, 2024 and sell it today you would earn a total of  7,436  from holding Cardiff Property PLC or generate 3.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Rio Tinto PLC  vs.  Cardiff Property 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 latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Cardiff Property PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardiff Property PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Cardiff Property may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rio Tinto and Cardiff Property

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

The idea behind Rio Tinto PLC and Cardiff Property 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.