Correlation Between Rio Tinto and Tartisan Nickel

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

Diversification Opportunities for Rio Tinto and Tartisan Nickel

0.63

Correlation Coefficient

Rio Tinto  Tartisan Nickel

Poor diversification

The 3 months correlation between Rio and Tartisan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto Group and Tartisan Nickel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tartisan Nickel 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 Tartisan Nickel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tartisan Nickel Corp has no effect on the direction of Rio Tinto i.e., Rio Tinto and Tartisan Nickel go up and down completely randomly.

Pair Corralation between Rio Tinto and Tartisan Nickel

Assuming the 90 days horizon Rio Tinto Group is not expected to generate positive returns. However, Rio Tinto Group is 1.78 times less risky than Tartisan Nickel. It waists most of its returns potential to compensate for thr risk taken. Tartisan Nickel is generating about 0.14 per unit of risk. If you would invest  10.00  in Tartisan Nickel Corp on September 1, 2024 and sell it today you would earn a total of  4.00  from holding Tartisan Nickel Corp or generate 40.0% return on investment over 90 days.

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

Rio Tinto Group  vs.  Tartisan Nickel Corp

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.

Tartisan Nickel Corp

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Rio Tinto and Tartisan Nickel

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

The idea behind Rio Tinto Group and Tartisan Nickel 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.