Correlation Between Flinders Resources and Erdene Resource

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

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

Diversification Opportunities for Flinders Resources and Erdene Resource

-0.8

Correlation Coefficient

Flinders Resources  Erdene Resource

Pay attention - limited upside

The 3 months correlation between Flinders and Erdene is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Flinders Resources Limited and Erdene Resource Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erdene Resource Deve and Flinders 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 Flinders Resources Limited are associated (or correlated) with Erdene Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erdene Resource Deve has no effect on the direction of Flinders Resources i.e., Flinders Resources and Erdene Resource go up and down completely randomly.

Pair Corralation between Flinders Resources and Erdene Resource

Assuming the 90 days horizon Flinders Resources Limited is expected to generate 1.46 times more return on investment than Erdene Resource. However, Flinders Resources is 1.46 times more volatile than Erdene Resource Development. It trades about 0.32 of its potential returns per unit of risk. Erdene Resource Development is currently generating about 0.07 per unit of risk. If you would invest  433.00  in Flinders Resources Limited on October 9, 2024 and sell it today you would earn a total of  139.00  from holding Flinders Resources Limited or generate 32.1% return on investment over 90 days.

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

Flinders Resources Limited  vs.  Erdene Resource Development

Flinders Resources

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Flinders Resources Limited are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Flinders Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Erdene Resource Deve

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Erdene Resource Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Flinders Resources and Erdene Resource

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

The idea behind Flinders Resources Limited and Erdene Resource Development 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.