Correlation Between Eros Resources and Commerce Resources

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

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

Diversification Opportunities for Eros Resources and Commerce Resources

0.54

Correlation Coefficient

Eros Resources  Commerce Resources

Very weak diversification

The 3 months correlation between Eros and Commerce is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Eros Resources Corp and Commerce Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerce Resources Corp and Eros Resources 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 Eros Resources Corp are associated (or correlated) with Commerce Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerce Resources Corp has no effect on the direction of Eros Resources i.e., Eros Resources and Commerce Resources go up and down completely randomly.

Pair Corralation between Eros Resources and Commerce Resources

Assuming the 90 days horizon Eros Resources Corp is expected to generate 0.39 times more return on investment than Commerce Resources. However, Eros Resources Corp is 2.54 times less risky than Commerce Resources. It trades about 0.09 of its potential returns per unit of risk. Commerce Resources Corp is currently generating about 0.03 per unit of risk. If you would invest  3.10  in Eros Resources Corp on October 30, 2024 and sell it today you would earn a total of  0.13  from holding Eros Resources Corp or generate 4.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

Eros Resources Corp  vs.  Commerce Resources Corp

Eros Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Commerce Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Eros Resources and Commerce Resources

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

The idea behind Eros Resources Corp and Commerce Resources 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.