Correlation Between Rio Tinto and K9 Gold

Can any of the company-specific risk be diversified away by investing in both Rio Tinto and K9 Gold 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 K9 Gold 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 K9 Gold Corp, you can compare the effects of market volatilities on Rio Tinto and K9 Gold 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 K9 Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Tinto and K9 Gold.

Diversification Opportunities for Rio Tinto and K9 Gold

0.41

Correlation Coefficient

Rio Tinto  K9 Gold

Very weak diversification

The 3 months correlation between Rio and WDFCF is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto ADR and K9 Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K9 Gold 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 K9 Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K9 Gold Corp has no effect on the direction of Rio Tinto i.e., Rio Tinto and K9 Gold go up and down completely randomly.

Pair Corralation between Rio Tinto and K9 Gold

Considering the 90-day investment horizon Rio Tinto is expected to generate 7.73 times less return on investment than K9 Gold. But when comparing it to its historical volatility, Rio Tinto ADR is 7.0 times less risky than K9 Gold. It trades about 0.13 of its potential returns per unit of risk. K9 Gold Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  4.70  in K9 Gold Corp on December 26, 2024 and sell it today you would earn a total of  3.40  from holding K9 Gold Corp or generate 72.34% return on investment over 90 days.

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

Rio Tinto ADR  vs.  K9 Gold Corp

Rio Tinto ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Rio Tinto may actually be approaching a critical reversion point that can send shares even higher in April 2025.

K9 Gold Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in K9 Gold Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, K9 Gold reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rio Tinto and K9 Gold

The main advantage of trading using opposite Rio Tinto and K9 Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Tinto position performs unexpectedly, K9 Gold 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 K9 Gold will offset losses from the drop in K9 Gold's long position.

The idea behind Rio Tinto ADR and K9 Gold 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.