Correlation Between Trilogy Metals and Rio Tinto

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

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

Diversification Opportunities for Trilogy Metals and Rio Tinto

-0.3

Correlation Coefficient

Trilogy Metals  Rio Tinto

Very good diversification

The 3 months correlation between Trilogy and Rio is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Trilogy Metals and Rio Tinto Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto Group and Trilogy Metals 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 Trilogy Metals 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 Group has no effect on the direction of Trilogy Metals i.e., Trilogy Metals and Rio Tinto go up and down completely randomly.

Pair Corralation between Trilogy Metals and Rio Tinto

Considering the 90-day investment horizon Trilogy Metals is expected to generate 3.55 times more return on investment than Rio Tinto. However, Trilogy Metals is 3.55 times more volatile than Rio Tinto Group. It trades about 0.14 of its potential returns per unit of risk. Rio Tinto Group is currently generating about 0.05 per unit of risk. If you would invest  110.00  in Trilogy Metals on October 24, 2024 and sell it today you would earn a total of  10.00  from holding Trilogy Metals or generate 9.09% return on investment over 90 days.

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

Trilogy Metals  vs.  Rio Tinto Group

Trilogy Metals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trilogy Metals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Trilogy Metals reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Trilogy Metals and Rio Tinto

The main advantage of trading using opposite Trilogy Metals and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trilogy Metals 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 Trilogy Metals and Rio Tinto Group 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.