Correlation Between Canada Rare and Eros Resources

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

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

Diversification Opportunities for Canada Rare and Eros Resources

-0.21

Correlation Coefficient

Canada Rare  Eros Resources

Very good diversification

The 3 months correlation between Canada and Eros is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Canada Rare Earth 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 Canada Rare 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 Canada Rare Earth 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 Canada Rare i.e., Canada Rare and Eros Resources go up and down completely randomly.

Pair Corralation between Canada Rare and Eros Resources

Assuming the 90 days horizon Canada Rare is expected to generate 1.06 times less return on investment than Eros Resources. In addition to that, Canada Rare is 1.9 times more volatile than Eros Resources Corp. It trades about 0.06 of its total potential returns per unit of risk. Eros Resources Corp is currently generating about 0.12 per unit of volatility. If you would invest  2.95  in Eros Resources Corp on December 20, 2024 and sell it today you would earn a total of  1.44  from holding Eros Resources Corp or generate 48.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Canada Rare Earth  vs.  Eros Resources Corp

Canada Rare Earth

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Canada Rare Earth are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Canada Rare reported solid returns over the last few months and may actually be approaching a breakup point.

Eros Resources Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eros Resources Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Eros Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Canada Rare and Eros Resources

The main advantage of trading using opposite Canada Rare and Eros Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canada Rare 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 Canada Rare Earth 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.