Correlation Between Agnico Eagle and Rio2

Can any of the company-specific risk be diversified away by investing in both Agnico Eagle and Rio2 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 Agnico Eagle and Rio2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Agnico Eagle Mines and Rio2 Limited, you can compare the effects of market volatilities on Agnico Eagle and Rio2 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 Agnico Eagle with a short position of Rio2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agnico Eagle and Rio2.

Diversification Opportunities for Agnico Eagle and Rio2

0.63

Correlation Coefficient

Agnico Eagle  Rio2

Poor diversification

The 3 months correlation between Agnico and Rio2 is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Agnico Eagle Mines and Rio2 Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio2 Limited and Agnico Eagle 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 Agnico Eagle Mines are associated (or correlated) with Rio2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio2 Limited has no effect on the direction of Agnico Eagle i.e., Agnico Eagle and Rio2 go up and down completely randomly.

Pair Corralation between Agnico Eagle and Rio2

Considering the 90-day investment horizon Agnico Eagle is expected to generate 2.22 times less return on investment than Rio2. But when comparing it to its historical volatility, Agnico Eagle Mines is 1.43 times less risky than Rio2. It trades about 0.13 of its potential returns per unit of risk. Rio2 Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  82.00  in Rio2 Limited on May 28, 2025 and sell it today you would earn a total of  34.00  from holding Rio2 Limited or generate 41.46% return on investment over 90 days.

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

Agnico Eagle Mines  vs.  Rio2 Limited

Agnico Eagle Mines

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Agnico Eagle Mines are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Agnico Eagle displayed solid returns over the last few months and may actually be approaching a breakup point.

Rio2 Limited

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rio2 Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Rio2 reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agnico Eagle and Rio2

The main advantage of trading using opposite Agnico Eagle and Rio2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agnico Eagle position performs unexpectedly, Rio2 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 Rio2 will offset losses from the drop in Rio2's long position.

The idea behind Agnico Eagle Mines and Rio2 Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.