Correlation Between Rokmaster Resources and Erdene Resource

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

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

Diversification Opportunities for Rokmaster Resources and Erdene Resource

-0.32

Correlation Coefficient

Rokmaster Resources  Erdene Resource

Very good diversification

The 3 months correlation between Rokmaster and Erdene is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Rokmaster Resources Corp and Erdene Resource Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Erdene Resource Deve and Rokmaster Resources 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 Rokmaster Resources Corp are associated (or correlated) with Erdene Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Erdene Resource Deve has no effect on the direction of Rokmaster Resources i.e., Rokmaster Resources and Erdene Resource go up and down completely randomly.

Pair Corralation between Rokmaster Resources and Erdene Resource

Assuming the 90 days horizon Rokmaster Resources Corp is expected to under-perform the Erdene Resource. In addition to that, Rokmaster Resources is 3.05 times more volatile than Erdene Resource Development. It trades about -0.03 of its total potential returns per unit of risk. Erdene Resource Development is currently generating about 0.14 per unit of volatility. If you would invest  32.00  in Erdene Resource Development on September 4, 2024 and sell it today you would earn a total of  11.00  from holding Erdene Resource Development or generate 34.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Rokmaster Resources Corp  vs.  Erdene Resource Development

Rokmaster Resources Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rokmaster Resources Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Erdene Resource Deve

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Erdene Resource Development are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal fundamental indicators, Erdene Resource reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rokmaster Resources and Erdene Resource

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

The idea behind Rokmaster Resources Corp and Erdene Resource Development 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.