Correlation Between Solaris Resources and Ero Copper

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

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

Diversification Opportunities for Solaris Resources and Ero Copper

-0.13

Correlation Coefficient

Solaris Resources  Ero Copper

Good diversification

The 3 months correlation between Solaris and Ero is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Solaris Resources 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 Solaris 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 Solaris Resources 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 Solaris Resources i.e., Solaris Resources and Ero Copper go up and down completely randomly.

Pair Corralation between Solaris Resources and Ero Copper

Assuming the 90 days trading horizon Solaris Resources is expected to generate 1.15 times more return on investment than Ero Copper. However, Solaris Resources is 1.15 times more volatile than Ero Copper Corp. It trades about 0.05 of its potential returns per unit of risk. Ero Copper Corp is currently generating about -0.13 per unit of risk. If you would invest  432.00  in Solaris Resources on December 1, 2024 and sell it today you would earn a total of  25.00  from holding Solaris Resources or generate 5.79% return on investment over 90 days.

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

Solaris Resources  vs.  Ero Copper Corp

Solaris Resources

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Solaris Resources are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Solaris Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Ero Copper Corp

Risk-Adjusted Performance

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 April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Solaris Resources and Ero Copper

The main advantage of trading using opposite Solaris Resources and Ero Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solaris Resources 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 Solaris Resources 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.