Correlation Between Endeavour Mining and BAE Systems

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

By analyzing existing cross correlation between Endeavour Mining Corp and BAE Systems plc, you can compare the effects of market volatilities on Endeavour Mining and BAE Systems 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 Endeavour Mining with a short position of BAE Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endeavour Mining and BAE Systems.

Diversification Opportunities for Endeavour Mining and BAE Systems

0.58

Correlation Coefficient

Endeavour Mining  BAE Systems

Very weak diversification

The 3 months correlation between Endeavour and BAE is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Endeavour Mining Corp and BAE Systems plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BAE Systems plc and Endeavour Mining 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 Endeavour Mining Corp are associated (or correlated) with BAE Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BAE Systems plc has no effect on the direction of Endeavour Mining i.e., Endeavour Mining and BAE Systems go up and down completely randomly.

Pair Corralation between Endeavour Mining and BAE Systems

Assuming the 90 days trading horizon Endeavour Mining Corp is expected to generate 2.53 times more return on investment than BAE Systems. However, Endeavour Mining is 2.53 times more volatile than BAE Systems plc. It trades about -0.08 of its potential returns per unit of risk. BAE Systems plc is currently generating about -0.2 per unit of risk. If you would invest  153,500  in Endeavour Mining Corp on October 10, 2024 and sell it today you would lose (6,300) from holding Endeavour Mining Corp or give up 4.1% of portfolio value over 90 days.

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

Endeavour Mining Corp  vs.  BAE Systems plc

Endeavour Mining Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Endeavour Mining Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

BAE Systems plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BAE Systems plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Endeavour Mining and BAE Systems

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

The idea behind Endeavour Mining Corp and BAE Systems plc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.