Correlation Between Rio Tinto and GMK Norilskiy

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

Diversification Opportunities for Rio Tinto and GMK Norilskiy

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Correlation Coefficient

Rio Tinto  GMK Norilskiy

Pay attention - limited upside

The 3 months correlation between Rio and GMK is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto ADR and GMK Norilskiy Nikel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GMK Norilskiy Nikel 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 GMK Norilskiy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GMK Norilskiy Nikel has no effect on the direction of Rio Tinto i.e., Rio Tinto and GMK Norilskiy go up and down completely randomly.

Pair Corralation between Rio Tinto and GMK Norilskiy

If you would invest  302.00  in GMK Norilskiy Nikel on September 16, 2024 and sell it today you would earn a total of  0.00  from holding GMK Norilskiy Nikel or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.79%
Values	Daily Returns

Rio Tinto ADR  vs.  GMK Norilskiy Nikel

Rio Tinto ADR

Risk-Adjusted Performance

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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 very healthy forward indicators, Rio Tinto is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

GMK Norilskiy Nikel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GMK Norilskiy Nikel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, GMK Norilskiy 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 GMK Norilskiy

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

The idea behind Rio Tinto ADR and GMK Norilskiy Nikel 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.