Correlation Between Erdene Resource and Dynacor Gold

Can any of the company-specific risk be diversified away by investing in both Erdene Resource and Dynacor Gold 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 Erdene Resource and Dynacor Gold into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Erdene Resource Development and Dynacor Gold Mines, you can compare the effects of market volatilities on Erdene Resource and Dynacor Gold 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 Erdene Resource with a short position of Dynacor Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Erdene Resource and Dynacor Gold.

Diversification Opportunities for Erdene Resource and Dynacor Gold

-0.76

Correlation Coefficient

Erdene Resource  Dynacor Gold

Pay attention - limited upside

The 3 months correlation between Erdene and Dynacor is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Erdene Resource Development and Dynacor Gold Mines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynacor Gold Mines and Erdene Resource 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 Erdene Resource Development are associated (or correlated) with Dynacor Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynacor Gold Mines has no effect on the direction of Erdene Resource i.e., Erdene Resource and Dynacor Gold go up and down completely randomly.

Pair Corralation between Erdene Resource and Dynacor Gold

Assuming the 90 days trading horizon Erdene Resource Development is expected to generate 1.56 times more return on investment than Dynacor Gold. However, Erdene Resource is 1.56 times more volatile than Dynacor Gold Mines. It trades about 0.17 of its potential returns per unit of risk. Dynacor Gold Mines is currently generating about -0.09 per unit of risk. If you would invest  55.00  in Erdene Resource Development on December 30, 2024 and sell it today you would earn a total of  21.00  from holding Erdene Resource Development or generate 38.18% return on investment over 90 days.

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

Erdene Resource Development  vs.  Dynacor Gold Mines

Erdene Resource Deve

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Erdene Resource Development are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Erdene Resource displayed solid returns over the last few months and may actually be approaching a breakup point.

Dynacor Gold Mines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dynacor Gold Mines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Erdene Resource and Dynacor Gold

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

The idea behind Erdene Resource Development and Dynacor Gold Mines 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.