Correlation Between Imperial Metals and Ero Copper

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

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

Diversification Opportunities for Imperial Metals and Ero Copper

0.72

Correlation Coefficient

Imperial Metals  Ero Copper

Poor diversification

The 3 months correlation between Imperial and Ero is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Metals 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 Imperial Metals 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 Imperial Metals 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 Imperial Metals i.e., Imperial Metals and Ero Copper go up and down completely randomly.

Pair Corralation between Imperial Metals and Ero Copper

Assuming the 90 days trading horizon Imperial Metals is expected to under-perform the Ero Copper. But the stock apears to be less risky and, when comparing its historical volatility, Imperial Metals is 1.09 times less risky than Ero Copper. The stock trades about -0.02 of its potential returns per unit of risk. The Ero Copper Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,102  in Ero Copper Corp on October 24, 2024 and sell it today you would lose (21.00) from holding Ero Copper Corp or give up 1.0% of portfolio value over 90 days.

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

Imperial Metals  vs.  Ero Copper Corp

Imperial Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imperial Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Imperial Metals 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

0 of 100

Very Weak

Over the last 90 days Ero Copper Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic 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 Imperial Metals and Ero Copper

The main advantage of trading using opposite Imperial Metals and Ero Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Metals 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 Imperial Metals 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.