Correlation Between Rio Tinto and Hammerson PLC

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

Diversification Opportunities for Rio Tinto and Hammerson PLC

0.62

Correlation Coefficient

Rio Tinto  Hammerson PLC

Poor diversification

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

Pair Corralation between Rio Tinto and Hammerson PLC

Assuming the 90 days trading horizon Rio Tinto PLC is expected to under-perform the Hammerson PLC. But the stock apears to be less risky and, when comparing its historical volatility, Rio Tinto PLC is 1.19 times less risky than Hammerson PLC. The stock trades about -0.04 of its potential returns per unit of risk. The Hammerson PLC is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  28,400  in Hammerson PLC on September 24, 2024 and sell it today you would lose (520.00) from holding Hammerson PLC or give up 1.83% of portfolio value over 90 days.

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

Rio Tinto PLC  vs.  Hammerson 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.

Hammerson PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hammerson PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Rio Tinto and Hammerson PLC

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

The idea behind Rio Tinto PLC and Hammerson 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.