Correlation Between Ero Copper and Capstone Copper

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

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

Diversification Opportunities for Ero Copper and Capstone Copper

0.61

Correlation Coefficient

Ero Copper  Capstone Copper

Poor diversification

The 3 months correlation between Ero and Capstone is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ero Copper Corp and Capstone Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Copper Corp and Ero Copper 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 Ero Copper Corp are associated (or correlated) with Capstone Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Copper Corp has no effect on the direction of Ero Copper i.e., Ero Copper and Capstone Copper go up and down completely randomly.

Pair Corralation between Ero Copper and Capstone Copper

Considering the 90-day investment horizon Ero Copper Corp is expected to generate 0.83 times more return on investment than Capstone Copper. However, Ero Copper Corp is 1.21 times less risky than Capstone Copper. It trades about 0.0 of its potential returns per unit of risk. Capstone Copper Corp is currently generating about -0.01 per unit of risk. If you would invest  1,332  in Ero Copper Corp on December 28, 2024 and sell it today you would lose (25.00) from holding Ero Copper Corp or give up 1.88% of portfolio value over 90 days.

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

Ero Copper Corp  vs.  Capstone Copper Corp

Ero Copper Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ero Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Ero Copper is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Capstone Copper Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Ero Copper and Capstone Copper

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

The idea behind Ero Copper Corp and Capstone Copper 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.