Correlation Between Eagle Plains and Fjordland Exploration

Can any of the company-specific risk be diversified away by investing in both Eagle Plains and Fjordland Exploration 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 Fjordland Exploration 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 Fjordland Exploration, you can compare the effects of market volatilities on Eagle Plains and Fjordland Exploration 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 Fjordland Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eagle Plains and Fjordland Exploration.

Diversification Opportunities for Eagle Plains and Fjordland Exploration

0.08

Correlation Coefficient

Eagle Plains  Fjordland Exploration

Significant diversification

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

Pair Corralation between Eagle Plains and Fjordland Exploration

Assuming the 90 days horizon Eagle Plains is expected to generate 4.41 times less return on investment than Fjordland Exploration. But when comparing it to its historical volatility, Eagle Plains Resources is 5.82 times less risky than Fjordland Exploration. It trades about 0.17 of its potential returns per unit of risk. Fjordland Exploration is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Fjordland Exploration on December 28, 2024 and sell it today you would earn a total of  0.50  from holding Fjordland Exploration or generate 50.0% return on investment over 90 days.

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

Eagle Plains Resources  vs.  Fjordland Exploration

Eagle Plains Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eagle Plains Resources are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eagle Plains showed solid returns over the last few months and may actually be approaching a breakup point.

Fjordland Exploration

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fjordland Exploration are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Fjordland Exploration showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eagle Plains and Fjordland Exploration

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

The idea behind Eagle Plains Resources and Fjordland Exploration 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.