Correlation Between Faraday Copper and Erdene Resource

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

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

Diversification Opportunities for Faraday Copper and Erdene Resource

0.09

Correlation Coefficient

Faraday Copper  Erdene Resource

Significant diversification

The 3 months correlation between Faraday and Erdene is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Faraday Copper Corp 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 Faraday Copper 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 Faraday Copper Corp 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 Faraday Copper i.e., Faraday Copper and Erdene Resource go up and down completely randomly.

Pair Corralation between Faraday Copper and Erdene Resource

Assuming the 90 days trading horizon Faraday Copper is expected to generate 3.42 times less return on investment than Erdene Resource. But when comparing it to its historical volatility, Faraday Copper Corp is 1.52 times less risky than Erdene Resource. It trades about 0.03 of its potential returns per unit of risk. Erdene Resource Development is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  61.00  in Erdene Resource Development on December 4, 2024 and sell it today you would earn a total of  7.00  from holding Erdene Resource Development or generate 11.48% return on investment over 90 days.

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

Faraday Copper Corp  vs.  Erdene Resource Development

Faraday Copper Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Faraday Copper Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Faraday Copper is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Erdene Resource Deve

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Erdene Resource Development are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Erdene Resource displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Faraday Copper and Erdene Resource

The main advantage of trading using opposite Faraday Copper and Erdene Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Faraday Copper 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 Faraday Copper Corp 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.