Correlation Between EP Financial and Truscott Mining

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

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

Diversification Opportunities for EP Financial and Truscott Mining

0.45

Correlation Coefficient

EP Financial  Truscott Mining

Very weak diversification

The 3 months correlation between EP1 and Truscott is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding EP Financial Group and Truscott Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Truscott Mining Corp and EP Financial 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 EP Financial Group are associated (or correlated) with Truscott Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Truscott Mining Corp has no effect on the direction of EP Financial i.e., EP Financial and Truscott Mining go up and down completely randomly.

Pair Corralation between EP Financial and Truscott Mining

Assuming the 90 days trading horizon EP Financial is expected to generate 1.44 times less return on investment than Truscott Mining. But when comparing it to its historical volatility, EP Financial Group is 1.27 times less risky than Truscott Mining. It trades about 0.1 of its potential returns per unit of risk. Truscott Mining Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  6.00  in Truscott Mining Corp on September 13, 2024 and sell it today you would earn a total of  1.80  from holding Truscott Mining Corp or generate 30.0% return on investment over 90 days.

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

EP Financial Group  vs.  Truscott Mining Corp

EP Financial Group

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EP Financial Group are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, EP Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Truscott Mining Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Truscott Mining Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Truscott Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EP Financial and Truscott Mining

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

The idea behind EP Financial Group and Truscott Mining 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.