RIO Tinto Ltd Stock Analysis

This document provides a detailed analysis of RIO Tinto Ltd stock performance, including beta, correlation with the market, and volatility. It also explains the concept of beta and why it changes over time. The document is a valuable resource for investors looking to understand the risk and volatility associated with RIO Tinto Ltd stock.

Company name: RIO Tinto Ltd (RIO.AX)
Solution 1a
Period 1: June 2012 to July 2014
Date RIO AORD
Adj Close Adj Close
May-12 42.08 4135.5
Jun-12 39.62 4289.4
Jul-12 36.67 4339
Aug-12 40.23 4406.3
Sep-12 42.93 4535.4
Oct-12 44.29 4518
Nov-12 49.77 4664.6
Dec-12 50.03 4901
Jan-13 50.55 5120.4
Feb-13 43.12 4979.9
Mar-13 42.68 5168.6
Apr-13 42.21 4914
May-13 40.06 4775.4
Jun-13 43.99 5035.7
Jul-13 44.60 5125.3
Aug-13 47.94 5217.7
Sep-13 49.69 5420.3
Oct-13 51.29 5314.3
Nov-13 52.94 5353.1
Dec-13 50.97 5205.1
Jan-14 51.90 5415.4
Feb-14 49.35 5403
Mar-14 48.80 5470.8
Apr-14 46.90 5473.8
May-14 46.91 5382
Jun-14 52.50 5623.1
Jul-14 49.53 5624.6

Period 2: February 2016 to January 2018
Date RIO AORD
Adj Close Adj Close
Jan-16 34.04 4947.9
Feb-16 37.34 5151.8
Mar-16 45.09 5316
Apr-16 39.09 5447.8
May-16 39.80 5310.4
Jun-16 43.35 5644
Jul-16 41.64 5529.4
Aug-16 45.68 5525.2
Sep-16 47.95 5402.4
Oct-16 51.11 5502.4
Nov-16 53.02 5719.1
Dec-16 59.02 5675
Jan-17 54.87 5761
Feb-17 54.81 5903.8
Mar-17 54.79 5947.6
Apr-17 56.94 5761.3
May-17 57.35 5764
Jun-17 59.64 5773.9
Jul-17 61.49 5776.3
Aug-17 61.58 5744.9
Sep-17 64.29 5976.4
Oct-17 65.68 6023.5
Nov-17 70.17 6167.3
Dec-17 71.14 6146.5
Jan-18 75.13 6117.3
Solution 1b

Period 1: June 2012 to July 2014
Date RIO AORD
ri rm Rf ri-Rf rm-Rf
May-12
Jun-12 -5.84% 3.72% 0.75% -6.59% 2.97%
Jul-12 -7.44% 1.16% 0.83% -8.28% 0.32%
Aug-12 9.70% 1.55% 0.83% 8.86% 0.72%
Sep-12 6.71% 2.93% 0.92% 5.79% 2.01%
Oct-12 3.18% -0.38% 0.83% 2.35% -1.22%
Nov-12 12.36% 3.24% 0.75% 11.61% 2.50%
Dec-12 0.53% 5.07% 0.58% -0.05% 4.48%
Jan-13 1.04% 4.48% 0.58% 0.46% 3.89%
Feb-13 -14.69% -2.74% 0.83% -15.52% -3.58%
Mar-13 -1.02% 3.79% 0.75% -1.77% 3.04%
Apr-13 -1.11% -4.93% 0.50% -1.61% -5.43%
May-13 -5.09% -2.82% 0.33% -5.43% -3.15%
Jun-13 9.81% 5.45% 0.42% 9.40% 5.03%
Jul-13 1.37% 1.78% 0.33% 1.04% 1.45%
Aug-13 7.50% 1.80% 0.33% 7.16% 1.47%
Sep-13 3.64% 3.88% 0.17% 3.48% 3.72%
Oct-13 3.23% -1.96% 0.42% 2.82% -2.37%
Nov-13 3.21% 0.73% 0.58% 2.63% 0.15%
Dec-13 -3.73% -2.76% 0.58% -4.31% -3.35%
Jan-14 1.83% 4.04% 0.33% 1.49% 3.71%
Feb-14 -4.92% -0.23% 0.42% -5.34% -0.65%
Mar-14 -1.11% 1.25% 0.42% -1.52% 0.84%
Apr-14 -3.89% 0.05% 0.25% -4.14% -0.20%
May-14 0.02% -1.68% 0.25% -0.23% -1.93%
Jun-14 11.92% 4.48% 0.33% 11.59% 4.15%
Jul-14 -5.65% 0.03% 0.25% -5.90% -0.22%
Period 2: February 2016 to January 2018

Date RIO AORD

ri rm Rf ri-Rf rm-Rf
Jan-16
Feb-16 9.72% 4.12% 2.58% 7.14% 1.54%
Mar-16 20.75% 3.19% 2.41% 18.34% 0.77%
Apr-16 -13.31% 2.48% 1.91% -15.22% 0.56%
May-16 1.81% -2.52% 2.25% -0.43% -4.77%
Jun-16 8.92% 6.28% 2.25% 6.68% 4.03%
Jul-16 -3.95% -2.03% 2.50% -6.45% -4.53%
Aug-16 9.71% -0.08% 2.50% 7.21% -2.57%
Sep-16 4.98% -2.22% 2.41% 2.57% -4.64%
Oct-16 6.59% 1.85% 2.75% 3.84% -0.89%
Nov-16 3.72% 3.94% 3.74% -0.02% 0.20%
Dec-16 11.32% -0.77% 4.24% 7.08% -5.01%
Jan-17 -7.03% 1.52% 4.24% -11.27% -2.72%
Feb-17 -0.11% 2.48% 4.32% -4.44% -1.84%
Mar-17 -0.03% 0.74% 6.15% -6.18% -5.40%
Apr-17 3.92% -3.13% 6.64% -2.72% -9.77%
May-17 0.73% 0.05% 7.39% -6.65% -7.34%
Jun-17 3.98% 0.17% 8.13% -4.15% -7.96%
Jul-17 3.12% 0.04% 8.87% -5.76% -8.83%
Aug-17 0.15% -0.54% 8.38% -8.23% -8.92%
Sep-17 4.39% 4.03% 8.54% -4.15% -4.51%
Oct-17 2.16% 0.79% 8.87% -6.71% -8.09%
Nov-17 6.85% 2.39% 10.19% -3.34% -7.81%
Dec-17 1.37% -0.34% 10.93% -9.56% -11.27%
Jan-18 5.61% -0.48% 11.67% -6.07% -12.15%
Solution 1 c
Period 1: June 2012 to July 2014
ri-Rf rm-Rf
Mean 0.31% 0.71%
Standard deviation 0.0634 0.0278
Variance 0.40% 0.08%
Correlation 0.5075 0.5075
Period 2: February 2016 to January 2018

Mean -2.02% -4.66%
standard deviation 0.0732 0.0422
Variance 0.54% 0.18%
Correlation 0.4923 0.4923
Interpretation
In period 1, the average returns were higher than period 2. Secodly, the volatility of stock was higher in
period 2. The stock has a weak correlation with the market.
Solution 1d
Period 1: June 2012 to July 2014
ß = 1.1564
Period 2: February 2016 to January 2018
ß = 0.8552
Solution 1e
Beta measures the volatility in comparison to the unsystematic risk of the entire market. A beta
<1.0 means that the security is less volatile than the market- this is the case for period 2. A beta
>1.0 means that the security is more volatile than the market which is the case for period .1
Solution 1f
Rio Tinto Ltd is one of the largest metal and mining companies in the world with operations in
Australia and other countries. Approximately 80% of the group revenues come from its iron ore
operations. The company is also involved in the exploration of coal, copper, gold, bauxite,
alumina, aluminum, uranium, salts and diamonds.2
1 Investopedia. "What Beta Means When Considering a Stock's Risk." 2019.
https://www.investopedia.com/investing/beta-know-risk/.
2 Rio Tinto. "About Us." Rio Tinto. 2018. https://www.riotinto.com.