Correlation Between Rio Tinto and Saint Jean

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

Diversification Opportunities for Rio Tinto and Saint Jean

-0.33

Correlation Coefficient

Rio Tinto  Saint Jean

Very good diversification

The 3 months correlation between Rio and Saint is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Saint Jean Carbon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saint Jean Carbon 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 Saint Jean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saint Jean Carbon has no effect on the direction of Rio Tinto i.e., Rio Tinto and Saint Jean go up and down completely randomly.

Pair Corralation between Rio Tinto and Saint Jean

Assuming the 90 days horizon Rio Tinto Group is expected to generate 0.11 times more return on investment than Saint Jean. However, Rio Tinto Group is 8.73 times less risky than Saint Jean. It trades about 0.02 of its potential returns per unit of risk. Saint Jean Carbon is currently generating about 0.0 per unit of risk. If you would invest  7,491  in Rio Tinto Group on December 27, 2024 and sell it today you would earn a total of  89.00  from holding Rio Tinto Group or generate 1.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Rio Tinto Group  vs.  Saint Jean Carbon

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.

Saint Jean Carbon

Risk-Adjusted Performance

Weak

Over the last 90 days Saint Jean Carbon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Saint Jean 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 Saint Jean

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

The idea behind Rio Tinto Group and Saint Jean Carbon 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.