Correlation Between Eros Resources and Strategic Resources

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

Diversification Opportunities for Eros Resources and Strategic Resources

-0.08

Correlation Coefficient

Eros Resources  Strategic Resources

Good diversification

The 3 months correlation between Eros and Strategic is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Eros Resources Corp and Strategic Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strategic Resources 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 Strategic Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strategic Resources has no effect on the direction of Eros Resources i.e., Eros Resources and Strategic Resources go up and down completely randomly.

Pair Corralation between Eros Resources and Strategic Resources

Assuming the 90 days horizon Eros Resources Corp is expected to under-perform the Strategic Resources. In addition to that, Eros Resources is 2.22 times more volatile than Strategic Resources. It trades about -0.19 of its total potential returns per unit of risk. Strategic Resources is currently generating about -0.22 per unit of volatility. If you would invest  47.00  in Strategic Resources on December 10, 2024 and sell it today you would lose (6.00) from holding Strategic Resources or give up 12.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Eros Resources Corp  vs.  Strategic Resources

Eros Resources Corp

Risk-Adjusted Performance

OK

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

Strategic Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Strategic Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Eros Resources and Strategic Resources

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

The idea behind Eros Resources Corp and Strategic Resources 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.