Correlation Between Tatton Asset and Rio Tinto

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

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

Diversification Opportunities for Tatton Asset and Rio Tinto

-0.17

Correlation Coefficient

Tatton Asset  Rio Tinto

Good diversification

The 3 months correlation between Tatton and Rio is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Tatton Asset Management and Rio Tinto PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto PLC and Tatton Asset 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 Tatton Asset Management 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 PLC has no effect on the direction of Tatton Asset i.e., Tatton Asset and Rio Tinto go up and down completely randomly.

Pair Corralation between Tatton Asset and Rio Tinto

Assuming the 90 days trading horizon Tatton Asset Management is expected to generate 1.24 times more return on investment than Rio Tinto. However, Tatton Asset is 1.24 times more volatile than Rio Tinto PLC. It trades about 0.06 of its potential returns per unit of risk. Rio Tinto PLC is currently generating about -0.01 per unit of risk. If you would invest  40,863  in Tatton Asset Management on October 4, 2024 and sell it today you would earn a total of  26,537  from holding Tatton Asset Management or generate 64.94% return on investment over 90 days.

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

Tatton Asset Management  vs.  Rio Tinto PLC

Tatton Asset Management

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tatton Asset Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Tatton Asset is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Rio Tinto PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rio Tinto PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Tatton Asset and Rio Tinto

The main advantage of trading using opposite Tatton Asset and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tatton Asset 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 Tatton Asset Management and Rio Tinto PLC 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..