Correlation Between Rio Tinto and Griffin Mining

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

Diversification Opportunities for Rio Tinto and Griffin Mining

0.52

Correlation Coefficient

Rio Tinto  Griffin Mining

Very weak diversification

The 3 months correlation between Rio and Griffin is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto PLC and Griffin Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffin Mining 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 Griffin Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Griffin Mining has no effect on the direction of Rio Tinto i.e., Rio Tinto and Griffin Mining go up and down completely randomly.

Pair Corralation between Rio Tinto and Griffin Mining

Assuming the 90 days trading horizon Rio Tinto is expected to generate 24.56 times less return on investment than Griffin Mining. But when comparing it to its historical volatility, Rio Tinto PLC is 1.41 times less risky than Griffin Mining. It trades about 0.0 of its potential returns per unit of risk. Griffin Mining is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,590  in Griffin Mining on October 5, 2024 and sell it today you would earn a total of  7,510  from holding Griffin Mining or generate 98.95% return on investment over 90 days.

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

Rio Tinto PLC  vs.  Griffin Mining

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 unsteady 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.

Griffin Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Griffin Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Griffin Mining is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rio Tinto and Griffin Mining

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

The idea behind Rio Tinto PLC and Griffin Mining 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .