Correlation Between ExGen Resources and District Copper

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

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

Diversification Opportunities for ExGen Resources and District Copper

0.09

Correlation Coefficient

ExGen Resources  District Copper

Significant diversification

The 3 months correlation between ExGen and District is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ExGen Resources and District Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on District Copper Corp and ExGen 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 ExGen Resources are associated (or correlated) with District Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of District Copper Corp has no effect on the direction of ExGen Resources i.e., ExGen Resources and District Copper go up and down completely randomly.

Pair Corralation between ExGen Resources and District Copper

Assuming the 90 days horizon ExGen Resources is expected to generate 2.23 times less return on investment than District Copper. But when comparing it to its historical volatility, ExGen Resources is 1.52 times less risky than District Copper. It trades about 0.11 of its potential returns per unit of risk. District Copper Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3.50  in District Copper Corp on October 9, 2024 and sell it today you would earn a total of  1.00  from holding District Copper Corp or generate 28.57% return on investment over 90 days.

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

ExGen Resources  vs.  District Copper Corp

ExGen Resources

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ExGen Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, ExGen Resources may actually be approaching a critical reversion point that can send shares even higher in February 2025.

District Copper Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in District Copper Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, District Copper showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ExGen Resources and District Copper

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

The idea behind ExGen Resources and District Copper 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.