Correlation Between HudBay Minerals and Ero Copper

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

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

Diversification Opportunities for HudBay Minerals and Ero Copper

0.84

Correlation Coefficient

HudBay Minerals  Ero Copper

Very poor diversification

The 3 months correlation between HudBay and Ero is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding HudBay Minerals and Ero Copper Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ero Copper Corp and HudBay Minerals 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 HudBay Minerals are associated (or correlated) with Ero Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ero Copper Corp has no effect on the direction of HudBay Minerals i.e., HudBay Minerals and Ero Copper go up and down completely randomly.

Pair Corralation between HudBay Minerals and Ero Copper

Assuming the 90 days trading horizon HudBay Minerals is expected to generate 1.5 times less return on investment than Ero Copper. In addition to that, HudBay Minerals is 1.26 times more volatile than Ero Copper Corp. It trades about 0.02 of its total potential returns per unit of risk. Ero Copper Corp is currently generating about 0.04 per unit of volatility. If you would invest  1,904  in Ero Copper Corp on December 20, 2024 and sell it today you would earn a total of  75.00  from holding Ero Copper Corp or generate 3.94% return on investment over 90 days.

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

HudBay Minerals  vs.  Ero Copper Corp

HudBay Minerals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HudBay Minerals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, HudBay Minerals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Ero Copper Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ero 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, Ero Copper is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with HudBay Minerals and Ero Copper

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

The idea behind HudBay Minerals and Ero 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.