Correlation Between MAG Silver and Eros Resources

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

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

Diversification Opportunities for MAG Silver and Eros Resources

0.44

Correlation Coefficient

MAG Silver  Eros Resources

Very weak diversification

The 3 months correlation between MAG and Eros is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding MAG Silver 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 MAG Silver 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 MAG Silver 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 MAG Silver i.e., MAG Silver and Eros Resources go up and down completely randomly.

Pair Corralation between MAG Silver and Eros Resources

Assuming the 90 days trading horizon MAG Silver Corp is expected to generate 0.37 times more return on investment than Eros Resources. However, MAG Silver Corp is 2.69 times less risky than Eros Resources. It trades about 0.12 of its potential returns per unit of risk. Eros Resources Corp is currently generating about 0.03 per unit of risk. If you would invest  1,859  in MAG Silver Corp on September 12, 2024 and sell it today you would earn a total of  362.00  from holding MAG Silver Corp or generate 19.47% return on investment over 90 days.

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

MAG Silver Corp  vs.  Eros Resources Corp

MAG Silver Corp

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MAG Silver Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, MAG Silver displayed solid returns over the last few months and may actually be approaching a breakup point.

Eros Resources Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eros Resources Corp are ranked lower than 2 (%) 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 MAG Silver and Eros Resources

The main advantage of trading using opposite MAG Silver and Eros Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MAG Silver 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 MAG Silver 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 Stocks Directory module to find actively traded stocks across global markets.