Correlation Between Ero Copper and Sparta Capital

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

Diversification Opportunities for Ero Copper and Sparta Capital

0.84

Correlation Coefficient

Ero Copper  Sparta Capital

Very poor diversification

The 3 months correlation between Ero and Sparta is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Ero Copper Corp and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital 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 Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Ero Copper i.e., Ero Copper and Sparta Capital go up and down completely randomly.

Pair Corralation between Ero Copper and Sparta Capital

Considering the 90-day investment horizon Ero Copper Corp is expected to under-perform the Sparta Capital. But the etf apears to be less risky and, when comparing its historical volatility, Ero Copper Corp is 1.04 times less risky than Sparta Capital. The etf trades about -0.22 of its potential returns per unit of risk. The Sparta Capital is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  1.96  in Sparta Capital on September 18, 2024 and sell it today you would lose (0.46) from holding Sparta Capital or give up 23.47% of portfolio value over 90 days.

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

Ero Copper Corp  vs.  Sparta Capital

Ero Copper Corp

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Etf's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ero Copper and Sparta Capital

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

The idea behind Ero Copper Corp and Sparta Capital 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.