Correlation Between Rio Tinto and EMX Royalty

Can any of the company-specific risk be diversified away by investing in both Rio Tinto and EMX Royalty 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 EMX Royalty into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Rio Tinto ADR and EMX Royalty Corp, you can compare the effects of market volatilities on Rio Tinto and EMX Royalty 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 EMX Royalty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and EMX Royalty.

Diversification Opportunities for Rio Tinto and EMX Royalty

0.65

Correlation Coefficient

Rio Tinto  EMX Royalty

Poor diversification

The 3 months correlation between Rio and EMX is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto ADR and EMX Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMX Royalty Corp 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 ADR are associated (or correlated) with EMX Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMX Royalty Corp has no effect on the direction of Rio Tinto i.e., Rio Tinto and EMX Royalty go up and down completely randomly.

Pair Corralation between Rio Tinto and EMX Royalty

Considering the 90-day investment horizon Rio Tinto ADR is expected to under-perform the EMX Royalty. But the stock apears to be less risky and, when comparing its historical volatility, Rio Tinto ADR is 1.12 times less risky than EMX Royalty. The stock trades about -0.23 of its potential returns per unit of risk. The EMX Royalty Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  173.00  in EMX Royalty Corp on October 4, 2024 and sell it today you would earn a total of  1.00  from holding EMX Royalty Corp or generate 0.58% return on investment over 90 days.

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

Rio Tinto ADR  vs.  EMX Royalty Corp

Rio Tinto ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio Tinto ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

EMX Royalty Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EMX Royalty Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, EMX Royalty is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rio Tinto and EMX Royalty

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

The idea behind Rio Tinto ADR and EMX Royalty Corp 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.