Correlation Between SBM OFFSHORE and Rio Tinto
Can any of the company-specific risk be diversified away by investing in both SBM OFFSHORE 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 SBM OFFSHORE and Rio Tinto into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM OFFSHORE and Rio Tinto Group, you can compare the effects of market volatilities on SBM OFFSHORE 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 SBM OFFSHORE with a short position of Rio Tinto. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM OFFSHORE and Rio Tinto.
Diversification Opportunities for SBM OFFSHORE and Rio Tinto
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SBM and Rio is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding SBM OFFSHORE 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 SBM OFFSHORE 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 SBM OFFSHORE 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 SBM OFFSHORE i.e., SBM OFFSHORE and Rio Tinto go up and down completely randomly.
Pair Corralation between SBM OFFSHORE and Rio Tinto
Assuming the 90 days trading horizon SBM OFFSHORE is expected to generate 1.39 times more return on investment than Rio Tinto. However, SBM OFFSHORE is 1.39 times more volatile than Rio Tinto Group. It trades about 0.09 of its potential returns per unit of risk. Rio Tinto Group is currently generating about 0.04 per unit of risk. If you would invest 1,715 in SBM OFFSHORE on September 9, 2025 and sell it today you would earn a total of 777.00 from holding SBM OFFSHORE or generate 45.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SBM OFFSHORE vs. Rio Tinto Group
Performance |
| Timeline |
| SBM OFFSHORE |
| Rio Tinto Group |
SBM OFFSHORE and Rio Tinto Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM OFFSHORE and Rio Tinto
The main advantage of trading using opposite SBM OFFSHORE and Rio Tinto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM OFFSHORE 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.| SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc | SBM OFFSHORE vs. Apple Inc |
| Rio Tinto vs. MINCO SILVER | Rio Tinto vs. Comba Telecom Systems | Rio Tinto vs. Coeur Mining | Rio Tinto vs. Sixt Leasing SE |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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