Correlation Between Sayona Mining and Rio Tinto

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

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

Diversification Opportunities for Sayona Mining and Rio Tinto

-0.63

Correlation Coefficient

Sayona Mining  Rio Tinto

Excellent diversification

The 3 months correlation between Sayona and Rio is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sayona Mining Limited and Rio Tinto ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto ADR and Sayona Mining 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 Sayona Mining Limited 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 ADR has no effect on the direction of Sayona Mining i.e., Sayona Mining and Rio Tinto go up and down completely randomly.

Pair Corralation between Sayona Mining and Rio Tinto

Assuming the 90 days horizon Sayona Mining Limited is expected to under-perform the Rio Tinto. In addition to that, Sayona Mining is 6.77 times more volatile than Rio Tinto ADR. It trades about -0.03 of its total potential returns per unit of risk. Rio Tinto ADR is currently generating about 0.14 per unit of volatility. If you would invest  5,693  in Rio Tinto ADR on December 27, 2024 and sell it today you would earn a total of  594.00  from holding Rio Tinto ADR or generate 10.43% return on investment over 90 days.

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

Sayona Mining Limited  vs.  Rio Tinto ADR

Sayona Mining Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sayona Mining Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Rio Tinto ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto ADR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, Rio Tinto may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sayona Mining and Rio Tinto

The main advantage of trading using opposite Sayona Mining and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sayona Mining 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 Sayona Mining Limited and Rio Tinto ADR 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.