Correlation Between Ero Copper and Lsb Industries

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

Diversification Opportunities for Ero Copper and Lsb Industries

0.57

Correlation Coefficient

Ero Copper  Lsb Industries

Very weak diversification

The 3 months correlation between Ero and Lsb is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ero Copper Corp and Lsb Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lsb Industries 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 Lsb Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lsb Industries has no effect on the direction of Ero Copper i.e., Ero Copper and Lsb Industries go up and down completely randomly.

Pair Corralation between Ero Copper and Lsb Industries

Considering the 90-day investment horizon Ero Copper Corp is expected to generate 0.79 times more return on investment than Lsb Industries. However, Ero Copper Corp is 1.27 times less risky than Lsb Industries. It trades about 0.03 of its potential returns per unit of risk. Lsb Industries is currently generating about -0.04 per unit of risk. If you would invest  1,351  in Ero Copper Corp on December 26, 2024 and sell it today you would earn a total of  48.00  from holding Ero Copper Corp or generate 3.55% return on investment over 90 days.

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

Ero Copper Corp  vs.  Lsb Industries

Ero Copper Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ero Copper Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Ero Copper may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lsb Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lsb Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ero Copper and Lsb Industries

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

The idea behind Ero Copper Corp and Lsb Industries 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 Transaction History module to view history of all your transactions and understand their impact on performance.