Correlation Between IperionX Limited and Rio Tinto

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

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

Diversification Opportunities for IperionX Limited and Rio Tinto

-0.14

Correlation Coefficient

IperionX Limited  Rio Tinto

Good diversification

The 3 months correlation between IperionX and Rio is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding IperionX Limited American and Rio Tinto ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Tinto ADR and IperionX Limited 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 IperionX Limited American 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 ADR has no effect on the direction of IperionX Limited i.e., IperionX Limited and Rio Tinto go up and down completely randomly.

Pair Corralation between IperionX Limited and Rio Tinto

Considering the 90-day investment horizon IperionX Limited American is expected to under-perform the Rio Tinto. In addition to that, IperionX Limited is 2.52 times more volatile than Rio Tinto ADR. It trades about -0.24 of its total potential returns per unit of risk. Rio Tinto ADR is currently generating about -0.01 per unit of volatility. If you would invest  5,677  in Rio Tinto ADR on January 10, 2025 and sell it today you would lose (116.00) from holding Rio Tinto ADR or give up 2.04% of portfolio value over 90 days.

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

IperionX Limited American  vs.  Rio Tinto ADR

IperionX Limited American

Risk-Adjusted Performance

Very Weak

Over the last 90 days IperionX Limited American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Rio Tinto ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rio Tinto ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Rio Tinto is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with IperionX Limited and Rio Tinto

The main advantage of trading using opposite IperionX Limited and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IperionX Limited 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 IperionX Limited American and Rio Tinto ADR 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.