Correlation Between Eros Resources and CI Financial

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

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

Diversification Opportunities for Eros Resources and CI Financial

-0.09

Correlation Coefficient

Eros Resources  CI Financial

Good diversification

The 3 months correlation between Eros and CIX is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Eros Resources Corp and CI Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Financial Corp and Eros Resources 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 Eros Resources Corp are associated (or correlated) with CI Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Financial Corp has no effect on the direction of Eros Resources i.e., Eros Resources and CI Financial go up and down completely randomly.

Pair Corralation between Eros Resources and CI Financial

Assuming the 90 days horizon Eros Resources Corp is expected to generate 2.19 times more return on investment than CI Financial. However, Eros Resources is 2.19 times more volatile than CI Financial Corp. It trades about 0.1 of its potential returns per unit of risk. CI Financial Corp is currently generating about 0.18 per unit of risk. If you would invest  4.00  in Eros Resources Corp on October 22, 2024 and sell it today you would earn a total of  1.50  from holding Eros Resources Corp or generate 37.5% return on investment over 90 days.

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

Eros Resources Corp  vs.  CI Financial Corp

Eros Resources Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eros Resources Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eros Resources showed solid returns over the last few months and may actually be approaching a breakup point.

CI Financial Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CI Financial Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CI Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eros Resources and CI Financial

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

The idea behind Eros Resources Corp and CI Financial 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.