Correlation Between Fortune Bay and Eros Resources

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

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

Diversification Opportunities for Fortune Bay and Eros Resources

0.49

Correlation Coefficient

Fortune Bay  Eros Resources

Very weak diversification

The 3 months correlation between Fortune and Eros is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fortune Bay Corp and Eros Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eros Resources Corp and Fortune Bay 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 Fortune Bay Corp are associated (or correlated) with Eros Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eros Resources Corp has no effect on the direction of Fortune Bay i.e., Fortune Bay and Eros Resources go up and down completely randomly.

Pair Corralation between Fortune Bay and Eros Resources

Assuming the 90 days horizon Fortune Bay is expected to generate 15.32 times less return on investment than Eros Resources. But when comparing it to its historical volatility, Fortune Bay Corp is 1.69 times less risky than Eros Resources. It trades about 0.01 of its potential returns per unit of risk. Eros Resources Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3.50  in Eros Resources Corp on September 15, 2024 and sell it today you would earn a total of  0.50  from holding Eros Resources Corp or generate 14.29% return on investment over 90 days.

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

Fortune Bay Corp  vs.  Eros Resources Corp

Fortune Bay Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortune Bay Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Fortune Bay is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Eros Resources Corp

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eros Resources Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Eros Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fortune Bay and Eros Resources

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

The idea behind Fortune Bay Corp and Eros Resources 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.