Correlation Between Solitario Exploration and Eros Resources

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

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

Diversification Opportunities for Solitario Exploration and Eros Resources

0.45

Correlation Coefficient

Solitario Exploration  Eros Resources

Very weak diversification

The 3 months correlation between Solitario and Eros is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Solitario Exploration Royalty 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 Solitario Exploration 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 Solitario Exploration Royalty 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 Solitario Exploration i.e., Solitario Exploration and Eros Resources go up and down completely randomly.

Pair Corralation between Solitario Exploration and Eros Resources

Assuming the 90 days trading horizon Solitario Exploration is expected to generate 5.62 times less return on investment than Eros Resources. But when comparing it to its historical volatility, Solitario Exploration Royalty is 2.1 times less risky than Eros Resources. It trades about 0.04 of its potential returns per unit of risk. Eros Resources Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4.00  in Eros Resources Corp on December 30, 2024 and sell it today you would earn a total of  1.50  from holding Eros Resources Corp or generate 37.5% return on investment over 90 days.

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

Solitario Exploration Royalty  vs.  Eros Resources Corp

Solitario Exploration

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solitario Exploration Royalty are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Solitario Exploration may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Eros Resources showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solitario Exploration and Eros Resources

The main advantage of trading using opposite Solitario Exploration and Eros Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solitario Exploration 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 Solitario Exploration Royalty 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.