Correlation Between THRACE PLASTICS and Rio Tinto

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

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

Diversification Opportunities for THRACE PLASTICS and Rio Tinto

-0.46

Correlation Coefficient

THRACE PLASTICS  Rio Tinto

Very good diversification

The 3 months correlation between THRACE and Rio is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding THRACE PLASTICS 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 THRACE PLASTICS 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 THRACE PLASTICS 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 THRACE PLASTICS i.e., THRACE PLASTICS and Rio Tinto go up and down completely randomly.

Pair Corralation between THRACE PLASTICS and Rio Tinto

Assuming the 90 days trading horizon THRACE PLASTICS is expected to generate 0.86 times more return on investment than Rio Tinto. However, THRACE PLASTICS is 1.16 times less risky than Rio Tinto. It trades about 0.07 of its potential returns per unit of risk. Rio Tinto Group is currently generating about -0.12 per unit of risk. If you would invest  375.00  in THRACE PLASTICS on October 4, 2024 and sell it today you would earn a total of  19.00  from holding THRACE PLASTICS or generate 5.07% return on investment over 90 days.

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

THRACE PLASTICS  vs.  Rio Tinto Group

THRACE PLASTICS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in THRACE PLASTICS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, THRACE PLASTICS is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with THRACE PLASTICS and Rio Tinto

The main advantage of trading using opposite THRACE PLASTICS and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if THRACE PLASTICS 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 THRACE PLASTICS 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.