Correlation Between Eagle Plains and Commander Resources

Can any of the company-specific risk be diversified away by investing in both Eagle Plains and Commander Resources 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 Eagle Plains and Commander Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eagle Plains Resources and Commander Resources, you can compare the effects of market volatilities on Eagle Plains and Commander Resources 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 Eagle Plains with a short position of Commander Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Plains and Commander Resources.

Diversification Opportunities for Eagle Plains and Commander Resources

-0.08

Correlation Coefficient

Eagle Plains  Commander Resources

Good diversification

The 3 months correlation between Eagle and Commander is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Plains Resources and Commander Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commander Resources and Eagle Plains 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 Eagle Plains Resources are associated (or correlated) with Commander Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commander Resources has no effect on the direction of Eagle Plains i.e., Eagle Plains and Commander Resources go up and down completely randomly.

Pair Corralation between Eagle Plains and Commander Resources

Assuming the 90 days horizon Eagle Plains Resources is expected to under-perform the Commander Resources. But the stock apears to be less risky and, when comparing its historical volatility, Eagle Plains Resources is 1.38 times less risky than Commander Resources. The stock trades about -0.04 of its potential returns per unit of risk. The Commander Resources is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8.00  in Commander Resources on September 9, 2024 and sell it today you would lose (1.00) from holding Commander Resources or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Eagle Plains Resources  vs.  Commander Resources

Eagle Plains Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Plains Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Commander Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commander Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Commander Resources is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Eagle Plains and Commander Resources

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

The idea behind Eagle Plains Resources and Commander Resources 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.