Correlation Between Sports Entertainment and Rio Tinto

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

By analyzing existing cross correlation between Sports Entertainment Group and Rio Tinto, you can compare the effects of market volatilities on Sports Entertainment and Rio Tinto 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 Sports Entertainment with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sports Entertainment and Rio Tinto.

Diversification Opportunities for Sports Entertainment and Rio Tinto

0.34

Correlation Coefficient

Sports Entertainment  Rio Tinto

Weak diversification

The 3 months correlation between Sports and Rio is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sports Entertainment Group and Rio Tinto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto and Sports Entertainment 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 Sports Entertainment Group are associated (or correlated) with Rio Tinto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Tinto has no effect on the direction of Sports Entertainment i.e., Sports Entertainment and Rio Tinto go up and down completely randomly.

Pair Corralation between Sports Entertainment and Rio Tinto

Assuming the 90 days trading horizon Sports Entertainment Group is expected to under-perform the Rio Tinto. In addition to that, Sports Entertainment is 2.81 times more volatile than Rio Tinto. It trades about -0.15 of its total potential returns per unit of risk. Rio Tinto is currently generating about -0.09 per unit of volatility. If you would invest  12,078  in Rio Tinto on October 6, 2024 and sell it today you would lose (331.00) from holding Rio Tinto or give up 2.74% of portfolio value over 90 days.

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

Sports Entertainment Group  vs.  Rio Tinto

Sports Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sports Entertainment Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Rio Tinto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio Tinto has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rio Tinto is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sports Entertainment and Rio Tinto

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

The idea behind Sports Entertainment Group and Rio Tinto 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.