Correlation Between Arizona Sonoran and Ero Copper

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

By analyzing existing cross correlation between Arizona Sonoran Copper and Ero Copper Corp, you can compare the effects of market volatilities on Arizona Sonoran and Ero Copper 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 Arizona Sonoran with a short position of Ero Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arizona Sonoran and Ero Copper.

Diversification Opportunities for Arizona Sonoran and Ero Copper

0.64

Correlation Coefficient

Arizona Sonoran  Ero Copper

Poor diversification

The 3 months correlation between Arizona and Ero is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Arizona Sonoran Copper and Ero Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ero Copper Corp and Arizona Sonoran 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 Arizona Sonoran Copper are associated (or correlated) with Ero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ero Copper Corp has no effect on the direction of Arizona Sonoran i.e., Arizona Sonoran and Ero Copper go up and down completely randomly.

Pair Corralation between Arizona Sonoran and Ero Copper

Assuming the 90 days trading horizon Arizona Sonoran Copper is expected to generate 0.98 times more return on investment than Ero Copper. However, Arizona Sonoran Copper is 1.02 times less risky than Ero Copper. It trades about -0.02 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.2 per unit of risk. If you would invest  155.00  in Arizona Sonoran Copper on September 15, 2024 and sell it today you would lose (9.00) from holding Arizona Sonoran Copper or give up 5.81% of portfolio value over 90 days.

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

Arizona Sonoran Copper  vs.  Ero Copper Corp

Arizona Sonoran Copper

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ero Copper Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ero Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Arizona Sonoran and Ero Copper

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

The idea behind Arizona Sonoran Copper and Ero Copper Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.