Correlation Between Entree Resources and Capstone Mining

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

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

Diversification Opportunities for Entree Resources and Capstone Mining

0.4

Correlation Coefficient

Entree Resources  Capstone Mining

Very weak diversification

The 3 months correlation between Entree and Capstone is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Entree Resources and Capstone Mining Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capstone Mining Corp and Entree 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 Entree Resources are associated (or correlated) with Capstone Mining. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capstone Mining Corp has no effect on the direction of Entree Resources i.e., Entree Resources and Capstone Mining go up and down completely randomly.

Pair Corralation between Entree Resources and Capstone Mining

Assuming the 90 days trading horizon Entree Resources is expected to under-perform the Capstone Mining. But the stock apears to be less risky and, when comparing its historical volatility, Entree Resources is 1.19 times less risky than Capstone Mining. The stock trades about -0.04 of its potential returns per unit of risk. The Capstone Mining Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  905.00  in Capstone Mining Corp on December 22, 2024 and sell it today you would lose (48.00) from holding Capstone Mining Corp or give up 5.3% of portfolio value over 90 days.

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

Entree Resources  vs.  Capstone Mining Corp

Entree Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entree Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Capstone Mining Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Entree Resources and Capstone Mining

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

The idea behind Entree Resources and Capstone Mining 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.