Correlation Between Rio Tinto and EMX Royalty

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

Diversification Opportunities for Rio Tinto and EMX Royalty

0.38

Correlation Coefficient

Rio Tinto  EMX Royalty

Weak diversification

The 3 months correlation between Rio and EMX is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and EMX Royalty Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMX Royalty 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 EMX Royalty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMX Royalty Corp has no effect on the direction of Rio Tinto i.e., Rio Tinto and EMX Royalty go up and down completely randomly.

Pair Corralation between Rio Tinto and EMX Royalty

Assuming the 90 days horizon Rio Tinto is expected to generate 1.63 times less return on investment than EMX Royalty. In addition to that, Rio Tinto is 1.39 times more volatile than EMX Royalty Corp. It trades about 0.03 of its total potential returns per unit of risk. EMX Royalty Corp is currently generating about 0.07 per unit of volatility. If you would invest  173.00  in EMX Royalty Corp on December 17, 2024 and sell it today you would earn a total of  12.00  from holding EMX Royalty Corp or generate 6.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.33%
Values	Daily Returns

Rio Tinto Group  vs.  EMX Royalty 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 2 (%) 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.

EMX Royalty Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EMX Royalty Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, EMX Royalty may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Rio Tinto and EMX Royalty

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

The idea behind Rio Tinto Group and EMX Royalty 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.