Correlation Between Rio2 and VIACOM

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Can any of the company-specific risk be diversified away by investing in both Rio2 and VIACOM 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 Rio2 and VIACOM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio2 and VIACOM INC 7875, you can compare the effects of market volatilities on Rio2 and VIACOM 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 Rio2 with a short position of VIACOM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio2 and VIACOM.

Diversification Opportunities for Rio2 and VIACOM

-0.42
  Correlation Coefficient

Very good diversification

The 3 months correlation between Rio2 and VIACOM is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Rio2 and VIACOM INC 7875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIACOM INC 7875 and Rio2 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 Rio2 are associated (or correlated) with VIACOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIACOM INC 7875 has no effect on the direction of Rio2 i.e., Rio2 and VIACOM go up and down completely randomly.

Pair Corralation between Rio2 and VIACOM

Assuming the 90 days trading horizon Rio2 is expected to generate 5.32 times more return on investment than VIACOM. However, Rio2 is 5.32 times more volatile than VIACOM INC 7875. It trades about 0.15 of its potential returns per unit of risk. VIACOM INC 7875 is currently generating about -0.02 per unit of risk. If you would invest  183.00  in Rio2 on August 31, 2025 and sell it today you would earn a total of  67.00  from holding Rio2 or generate 36.61% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.24%
ValuesDaily Returns

Rio2  vs.  VIACOM INC 7875

 Performance 
       Timeline  
Rio2 

Risk-Adjusted Performance

Good

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Rio2 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Rio2 displayed solid returns over the last few months and may actually be approaching a breakup point.
VIACOM INC 7875 

Risk-Adjusted Performance

Weakest

 
Weak
 
Strong
Over the last 90 days VIACOM INC 7875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VIACOM is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Rio2 and VIACOM Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Rio2 and VIACOM

The main advantage of trading using opposite Rio2 and VIACOM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio2 position performs unexpectedly, VIACOM 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 VIACOM will offset losses from the drop in VIACOM's long position.
The idea behind Rio2 and VIACOM INC 7875 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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