Correlation Between Ceapro and Rio Tinto

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Can any of the company-specific risk be diversified away by investing in both Ceapro 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 Ceapro and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ceapro and Rio Tinto PLC, you can compare the effects of market volatilities on Ceapro 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 Ceapro with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ceapro and Rio Tinto.

Diversification Opportunities for Ceapro and Rio Tinto

-0.5
  Correlation Coefficient

Very good diversification

The 3 months correlation between Ceapro and Rio is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ceapro 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 Ceapro 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 Ceapro 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 Ceapro i.e., Ceapro and Rio Tinto go up and down completely randomly.

Pair Corralation between Ceapro and Rio Tinto

Assuming the 90 days horizon Ceapro is expected to under-perform the Rio Tinto. In addition to that, Ceapro is 1.36 times more volatile than Rio Tinto PLC. It trades about -0.04 of its total potential returns per unit of risk. Rio Tinto PLC is currently generating about 0.05 per unit of volatility. If you would invest  692,740  in Rio Tinto PLC on December 29, 2023 and sell it today you would earn a total of  160,960  from holding Rio Tinto PLC or generate 23.24% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy97.59%
ValuesDaily Returns

Ceapro  vs.  Rio Tinto PLC

 Performance 
       Timeline  
Ceapro 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ceapro are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Ceapro showed solid returns over the last few months and may actually be approaching a breakup point.
Rio Tinto PLC 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Rio Tinto PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Ceapro and Rio Tinto Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ceapro and Rio Tinto

The main advantage of trading using opposite Ceapro and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ceapro 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 Ceapro 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.
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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