Correlation Between Erdene Resource and Granite Creek

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

Diversification Opportunities for Erdene Resource and Granite Creek

0.09

Correlation Coefficient

Erdene Resource  Granite Creek

Significant diversification

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

Pair Corralation between Erdene Resource and Granite Creek

Assuming the 90 days horizon Erdene Resource Development is expected to generate 0.58 times more return on investment than Granite Creek. However, Erdene Resource Development is 1.74 times less risky than Granite Creek. It trades about -0.1 of its potential returns per unit of risk. Granite Creek Copper is currently generating about -0.06 per unit of risk. If you would invest  48.00  in Erdene Resource Development on September 5, 2024 and sell it today you would lose (4.00) from holding Erdene Resource Development or give up 8.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Erdene Resource Development  vs.  Granite Creek Copper

Erdene Resource Deve

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Erdene Resource Development are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Erdene Resource reported solid returns over the last few months and may actually be approaching a breakup point.

Granite Creek Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Granite Creek Copper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Granite Creek is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Erdene Resource and Granite Creek

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

The idea behind Erdene Resource Development and Granite Creek Copper 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..