Correlation Between Rio Tinto and Bathurst Metals

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

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

Diversification Opportunities for Rio Tinto and Bathurst Metals

0.0

Correlation Coefficient

Rio Tinto  Bathurst Metals

Pay attention - limited upside

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

Pair Corralation between Rio Tinto and Bathurst Metals

If you would invest  4.36  in Bathurst Metals Corp on December 20, 2024 and sell it today you would earn a total of  0.00  from holding Bathurst Metals Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Rio Tinto Group  vs.  Bathurst Metals Corp

Rio Tinto Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Rio Tinto is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Bathurst Metals Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bathurst Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bathurst Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Rio Tinto and Bathurst Metals

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

The idea behind Rio Tinto Group and Bathurst Metals 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.