Correlation Between Rio Tinto and Arq

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

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

Diversification Opportunities for Rio Tinto and Arq

0.52

Correlation Coefficient

Rio Tinto  Arq

Very weak diversification

The 3 months correlation between Rio and Arq is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rio Tinto ADR and Arq Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arq Inc and Rio Tinto 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 Rio Tinto ADR are associated (or correlated) with Arq. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arq Inc has no effect on the direction of Rio Tinto i.e., Rio Tinto and Arq go up and down completely randomly.

Pair Corralation between Rio Tinto and Arq

Considering the 90-day investment horizon Rio Tinto is expected to generate 11.47 times less return on investment than Arq. But when comparing it to its historical volatility, Rio Tinto ADR is 5.94 times less risky than Arq. It trades about 0.13 of its potential returns per unit of risk. Arq Inc is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  381.00  in Arq Inc on March 2, 2025 and sell it today you would earn a total of  128.00  from holding Arq Inc or generate 33.6% return on investment over 90 days.

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

Rio Tinto ADR  vs.  Arq Inc

Rio Tinto ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rio Tinto ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Arq Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arq Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Arq may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Pair Trading with Rio Tinto and Arq

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

The idea behind Rio Tinto ADR and Arq Inc 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.