Correlation Between Eros Resources and New Destiny

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

Diversification Opportunities for Eros Resources and New Destiny

0.2

Correlation Coefficient

Eros Resources  New Destiny

Modest diversification

The 3 months correlation between Eros and New is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Eros Resources Corp and New Destiny Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Destiny Mining 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 New Destiny. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Destiny Mining has no effect on the direction of Eros Resources i.e., Eros Resources and New Destiny go up and down completely randomly.

Pair Corralation between Eros Resources and New Destiny

Assuming the 90 days horizon Eros Resources Corp is expected to generate 1.19 times more return on investment than New Destiny. However, Eros Resources is 1.19 times more volatile than New Destiny Mining. It trades about 0.01 of its potential returns per unit of risk. New Destiny Mining is currently generating about -0.19 per unit of risk. If you would invest  4.50  in Eros Resources Corp on September 30, 2024 and sell it today you would lose (0.50) from holding Eros Resources Corp or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Eros Resources Corp  vs.  New Destiny Mining

Eros Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

New Destiny Mining

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Destiny Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Eros Resources and New Destiny

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

The idea behind Eros Resources Corp and New Destiny Mining 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.

Check out your portfolio center.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..