Correlation Between Rio Tinto and Callinex Mines

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

Diversification Opportunities for Rio Tinto and Callinex Mines

0.62

Correlation Coefficient

Rio Tinto  Callinex Mines

Poor diversification

The 3 months correlation between Rio and Callinex is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Callinex Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Callinex Mines 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 Callinex Mines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Callinex Mines has no effect on the direction of Rio Tinto i.e., Rio Tinto and Callinex Mines go up and down completely randomly.

Pair Corralation between Rio Tinto and Callinex Mines

Assuming the 90 days horizon Rio Tinto Group is not expected to generate positive returns. However, Rio Tinto Group is 1.01 times less risky than Callinex Mines. It waists most of its returns potential to compensate for thr risk taken. Callinex Mines is generating about -0.01 per unit of risk. If you would invest  6,260  in Rio Tinto Group on September 3, 2024 and sell it today you would lose (119.00) from holding Rio Tinto Group or give up 1.9% of portfolio value over 90 days.

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

Rio Tinto Group  vs.  Callinex Mines

Rio Tinto Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio Tinto Group has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Callinex Mines

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Rio Tinto Group and Callinex Mines 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.